Idiosyncratic return variation: Firm-specific information or noise?

Yaruo Shu and Sungbin Sohn

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: There has been a long debate on the interpretation of idiosyncratic return variation. We inform this debate by examining the extent to which stock return synchronicity is associated with post-earnings announcement drift (PEAD) in China. We find that firms with higher synchronicity exhibit less pronounced PEAD and that this negative association weakens for firms with high institutional ownership. The findings suggest that in the Chinese stock markets, where retail investors are in the majority, idiosyncratic returns reflect noise rather than firm-specific information on average, and institutional investors play a role in reducing noise in idiosyncratic returns.

Keywords: Stock return synchronicity; Price informativeness; Post-earnings announcement drift; Institutional ownership (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612322001015
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612322001015

DOI: 10.1016/j.frl.2022.102789

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().