Asset pricing economists tend to be quite smart and quite well paid. Permit me to pose a puzzle for them. Facebook's "lockup" period ends this Thursday. Does Modern Asset Pricing predict that this anticipated news is not "new news" and thus the event will have no effect on Facebook's stock value? When I was younger, we were taught that only unanticipated events (i.e "new news") moves asset prices.
But, consider the following. The incumbent owners of Facebook shares are insiders who presumably have better information about the company's true health. If these owners start to sell a large number of shares on Thursday could this lead to stampede due to herding effects as the "outsiders" (guys like me) infer bad expectations if the incumbents seek to dump shares? So, would an empirical prediction be that after "lockups" end if the first day after the stock price falls that this predicts more short run declines? If traders know this correlation, then does the stock fall even more sharply on the initial bad momentum on the day the lockup ends?
How does herding caused by an event (i.e the end of the Facebook lockup) interact in a model of asset pricing?
Switching to Spam --- here is an email I just received. I hope it helps you.
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Finding Your Road to Success - How to get there without getting lost
By Patrick Daniel
PDCA Publishing
ISBN # 9780986706004 Paper format
ISBN # 9780986706011 E-book format
