Informedness and the Consensus effects

The information in public announcements, such as the informedness and the consensus effects, may influence how the market responds to further information. When investors have more knowledge about business value at the time of an information release, the informedness impact takes place. As investors become more informed and take action to update their portfolios, this phenomenon typically results in an increase in share turnover and price volatility, but a decrease in the bid-ask gap since the realised price is likely to be further from the projected price.

The consensus impact gauges the level of investor agreement at the time of an information release. Due to investors' tendency to perceive information uniformly and the fact that less ambiguity is addressed through the market aggregation process, it often results in a decrease in bid-ask spread and volume and an increase in price volatility.

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STEWARDSHIP THEORY

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