Information arrival, changes in R-square and pricing asymmetry of corporate news

Louis T.W. Cheng, T.Y. Leung and Wayne Yu

International Review of Economics & Finance, 2014, vol. 33, issue C, 67-81

Abstract: Previous research on R-square has focused on the cross-sectional effects of the level of R-square and the results are mixed. We argue that changes in R-square can capture how new information is incorporated into stock prices. We examine the changes in R-square and stock price synchronicity upon compliance disclosures of earnings and regulatory reprimanding disclosures of “special treatment” status in China. Our results show that upon information arrival, R-square decreases because of the increase in firm-level information from the announcements, a result that is consistent with our hypothesis. Moreover, the market is more reactive in pricing bad rather than good news.

Keywords: Earnings; Pricing efficiency; Reprimanding disclosure; R-square; Synchronicity (search for similar items in EconPapers)
JEL-codes: D80 G14 G38 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:33:y:2014:i:c:p:67-81

DOI: 10.1016/j.iref.2014.03.004

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