Private Information Production and the Efficiency of Intra-Industry Information Transfers

Jingjing Xia ()
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Jingjing Xia: College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325015, China

JRFM, 2025, vol. 18, issue 1, 1-25

Abstract: This paper challenges the prevailing view that intra-industry information transfers are primarily driven by public information. Contrary to conventional wisdom, I find that investors in late-announcing firms impound more private information after early-announcing peers report earnings. This increase is substantial, leading to an 18.2% decrease in analyst forecast consensus and a 24.9% increase in forecast precision. Moreover, the probability of informed trading rises by 2% on days with peer announcements. This finding is important because investors tend to overweight (underweight) private (public) signals, thereby exacerbating over- and underreaction anomalies. Our study confirms that these anomalies are more pronounced when early announcements stimulate private information production, offering a theoretical explanation for their puzzling coexistence. These findings have significant implications for investor behavior and market efficiency. Investors should diligently evaluate both public and private information, particularly following peer announcements. Policymakers can leverage these findings to design regulations that promote transparency and foster efficient information dissemination.

Keywords: intra-industry information transfer; private information production; overconfidence; market efficiency (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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