My dissertation studies the measurement of investor disagreement and the effects of investor disagreement on asset prices. In my first essay, I clarify the seemingly contradicting theoretical predictions of Miller (1977), and Varian (1985, 1989) and Abel (1989), and design empirical analysis to test the predictions in a unified framework. Miller models the effect of the level of disagreement on asset prices and predicts a negative relation between investor disagreement and subsequent asset returns. Varian and Abel present results on the effect of the change in disagreement on asset prices and the resulting positive relation between disagreement and subsequent asset returns. I find that, consistent with Varian (1985) and Abel (1989), increases (decreases) in disagreement are always associated with lower (higher) contemporaneous stock returns, regardless of the prior levels of disagreement. Because the level of investor disagreement is highly persistent, stocks with high prior levels of disagreement earn lower subsequent returns as disagreements on these stocks remain high or continue to increase. Consequently, changes in investor disagreement and their impact on stock prices, not overvaluation as in Miller (1977), drive the relation between investor disagreement and subsequent stock returns documented in the existing literature. Empirical analyses based on changing short-sale constraints and earnings announcements provide further support to the central role of changing investor disagreement in asset pricing. In my second essay, I emphasize and examine the role of the consensus investor opinion in the relation between heterogeneous investor beliefs and stock prices, which is largely overlooked in the prior empirical literature. I measure investors' opinions based on financial analysts' stock recommendations and study how both investors' opinions and their disagreement jointly affect stock prices. I show that the consensus opinion is at least as important as the dispersion of opinion in predicting stock returns. When the consensus opinion is pessimistic, investor disagreement leads to lower stock returns, but the opposite is true when the consensus opinion is optimistic. Moreover, strong investor agreement predicts stock returns and largely drives the return difference between high- and low-agreement stocks. In supporting evidence, I show that both the investor opinion and its dispersion are related to short-sale constraints and strong optimistic agreement is significantly associated with binding short-sale constraints.


If this is your thesis or dissertation, and want to learn how to access it or for more information about readership statistics, contact us at STARS@ucf.edu

Graduation Date





Wang, Qinghai


Doctor of Philosophy (Ph.D.)


College of Business Administration

Degree Program

Business Administration; Finance




CFE0008991; DP0026324





Release Date

May 2022

Length of Campus-only Access


Access Status

Doctoral Dissertation (Open Access)

Included in

Finance Commons