||This paper attempts to address the connections among the nature of news, insider
ownership, stock price, and stock returns from the aspect of factors in financial theories
that influence investors’ mentality. The empirical studies show that stock price could
mislead investors’ behavior and enhance the impact of the nature of news on stock returns.
Besides, the higher stock price is, the less impact analyst forecast revision would create.
This research assumes that investors tend to be over-confident and overestimate their
ability to invest when stock price is buoyant, thus ignoring analyst forecast revision.
Instead, when stock price declines, the impact of analyst forecast revision would become
The higher percentage insider ownerships account for, the less impact the nature of
news would create. This study assumes that investors would have the stereotyped impression that when insiders maintain high ownership, they would share the same
related interests with other investors or insiders have more access to corporate inside
information. Investors with such stereotyped impression would determine future stock
returns by means of percentage of insider ownership rather than totally rely on analyst
forecast revision. Thus, even though there is negative news spreading around, higher
insider ownership could still reassure investors and make less significant difference
between investors’ reactions towards positive news and negative news.