Commonality in news around the world

Tung Dang, Fariborz Moshirian and Bohui Zhang

Journal of Financial Economics, 2015, vol. 116, issue 1, 82-110

Abstract: Motivated by the pioneering study of Morck, Yeung, and Yu (2000), this paper investigates whether and how news commonality varies according to a country׳s institutional environments. Using a unique global news data set across 41 countries for the 2000–2009 period, we document three notable findings. First, firm-level news comoves more in countries with weaker institutional environments than in those with stronger institutional environments. Second, news commonality is positively associated with both stock return comovement and stock liquidity commonality. Third, the effect of news commonality on stock return and liquidity comovement is higher in countries with stronger institutions than in those with weaker institutions. These results suggest that a country׳s institutional environments affect firm-specific information production and, more importantly, support the information-efficiency view that lower price synchronicity is caused by greater capitalization of firm-specific information.

Keywords: News commonality; Information production; Institutional environments; Stock return comovement; Stock liquidity commonality (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:116:y:2015:i:1:p:82-110

DOI: 10.1016/j.jfineco.2014.11.007

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