What Moves Stock Prices? The Roles of News, Noise, and Information

Jonathan Brogaard, Thanh Huong Nguyen, Talis Putnins and Eliza Wu

The Review of Financial Studies, 2022, vol. 35, issue 9, 4341-4386

Abstract: We develop a return variance decomposition model to distinguish the roles of different types of information and noise in stock price movements. We disentangle four components: noise, private firm-specific information revealed through trading, firm-specific information revealed through public sources and market-wide information. Overall, we find that 31$\%$ of the return variance is from noise, 24$\%$ from private firm-specific information, 37$\%$ from public firm-specific information and 8$\%$ from market-wide information. Since the mid-1990s, there has been a dramatic decline in noise and an increase in firm-specific information, consistent with increasing market efficiency.The Internet Appendix that accompanies this paper can be obtained here: https://bit.ly/3FcV9UR

JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (21)

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