Commonality in disagreement

Qiang Gong, Gady Jacoby, Shi Li and Lei Lu

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: We examine the relationship between firms' individual disagreement and the aggregate disagreement. We find that a commonality in firms' individual disagreements exists at the market level, industry level, and geographic level. This commonality increases with a firm's asymmetric information, uncertainty, and the degree of coverage, but decreases with a firm's accounting information quality. We show that disagreement commonality can be a new measure of firm-specific information centering on analysts. We find a positive relationship between firms' commonality in disagreement and co-movement in their stock returns. A higher disagreement commonality may indicate lower usefulness of firm-specific information that strengthens the synchronicity between a firm's stock return and the market return. Our measure of disagreement commonality is especially useful among inefficient markets where analysts are heavily relied on by investors, such as Asia Pacific markets.

Keywords: Disagreement; Information environment; Stock return co-movement (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000809

DOI: 10.1016/j.pacfin.2021.101573

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