Abstract
Previous studies explain ex-day returns of stock distributions based on microstructure theories. We argue that investors tend to anchor on cum-day prices in valuating ex-distribution stocks. Consistent with the anchoring explanation, we find that ex-day returns increase with the adjustment factor. Moreover, the positive relation between return and adjustment factor is stronger when stock-level anchoring propensity is higher, measured by smaller magnitude or lower occurring frequency of the adjustment factor, stronger predictive power for future returns by past prices, or higher idiosyncratic volatility. The documented evidence is robust for the control of microstructure explanations.
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