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Is stock price informativeness shaped by our genes?

Alexandru Todea and Daiana Florina Petrescu

Economic Modelling, 2021, vol. 103, issue C

Abstract: Do deeply rooted genetic traits, dating thousands of years, affect how information is impounded into stock prices nowadays? It is an intriguing idea, but one that stems from several studies that support the underlying economic intuition because genetic factors affect psychological traits, such as trust and creativity, that are known to influence price informativeness. Using data from 42 countries during 2004–2016, we investigate the impact of genetic diversity on stock price informativeness and find strong evidence in support of a hump-shaped relationship, that is, intermediate levels of genetic diversity are associated with high price informativeness and low/high genetic diversity is associated with low price informativeness. Institutional quality affects this relationship nonlinearly. Hence, improving the quality of institutions has positive effects on price informativeness, especially for nations with high/low genetic diversity.

Keywords: Stock price informativeness; Synchronicity; Private trading information; Genetic diversity; Institutional quality (search for similar items in EconPapers)
JEL-codes: G14 G15 O50 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.econmod.2021.105596

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