We thank conference participants at the 2010 FMA Annual Meeting in New York and the 2010 New Zealand Finance Colloquium and Veljko Fotak (our FMA discussant), Hamish Anderson, Henk Berkman, Ben Jacobsen, Chris Malone, Nick Nguyen, Kuntara Pukthuanthong, Jeff Wongchoti and the editor, Robert Faff for valuable comments. All errors are our own.
Sell the rumour, buy the fact?
Article first published online: 20 AUG 2012
© 2012 The Authors. Accounting and Finance © 2012 AFAANZ
Accounting & Finance
Volume 54, Issue 1, pages 237–249, March 2014
How to Cite
Marshall, B. R., Visaltanachoti, N. and Cooper, G. (2014), Sell the rumour, buy the fact?. Accounting & Finance, 54: 237–249. doi: 10.1111/j.1467-629X.2012.00496.x
- Issue published online: 3 MAR 2014
- Article first published online: 20 AUG 2012
- Received 15 September 2011; accepted 9 June 2012 by Robert Faff (Editor).
- Gradual Information Diffusion;
- Investor Inattention;
- Limits to Arbitrage
We document a high-profile instance of mispricing that is puzzling given the gradual information diffusion hypothesis and the lack of obvious limits to arbitrage. An internet search in 2008 led to a story about United Airlines’ 2002 bankruptcy being re-released as ‘news’. This resulted in United Airlines losing 73 per cent of its value and caused a $4.2 billion decline in the value of airline stocks and United Airlines suppliers. The incorrect bankruptcy ‘news’ was quickly retracted, which led to a rebound in other airline and supplier firms, but the stock price of United Airlines was adversely affected for 4 days.