Leveling the informational Playing Field

Orie Edwin Barron, Donal Byard, Charles R. Enis

Research output: Contribution to journalReview article

3 Citations (Scopus)

Abstract

This study uses experimental data to compare the information generated by professional and nonprofessional investors when both groups receive access to the same financial disclosures. We also manipulate the disclosure level for both subject groups. Using the method developed by Barron, Kim, Lim and Stevens (1998), we then analyze the information contained in stock price forecasts that were made by the experimental subjects. Professionals on average inferred more information than nonprofessionals. The higher level of disclosure did not affect the information possessed by the professional investors. However, we find that a higher level of disclosure is associated with more private information being produced (or inferred) by nonprofessional investors. As a result, these subjects realized a significant improvement in the accuracy of their mean forecasts relative to their individual forecasts. This finding suggests that the enhanced capacity of firms to widely disclose information to all market participants via the Internet, together with the SEC's new “Fair Disclosure (FD)” regulation, has the potential to produce a significant increase in privately inferred information for on-line nonprofessionals, potentially resulting in the aggregation of more diverse information into share prices.

Original languageEnglish (US)
Pages (from-to)21-46
Number of pages26
JournalReview of Accounting and Finance
Volume3
Issue number4
DOIs
StatePublished - Apr 1 2004

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Leveling
Disclosure
Nonprofessional investors
Regulation fair disclosure
Private information
Information share
World Wide Web
Financial disclosure
Investors
Share prices
Stock prices

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance

Cite this

Barron, Orie Edwin ; Byard, Donal ; Enis, Charles R. / Leveling the informational Playing Field. In: Review of Accounting and Finance. 2004 ; Vol. 3, No. 4. pp. 21-46.
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Leveling the informational Playing Field. / Barron, Orie Edwin; Byard, Donal; Enis, Charles R.

In: Review of Accounting and Finance, Vol. 3, No. 4, 01.04.2004, p. 21-46.

Research output: Contribution to journalReview article

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