Evidence on Stock Reaction to Market-Wide Information

Ding Du, Karen Denning () and Xiaobing Zhao ()
Additional contact information
Karen Denning: Department of Economics and Finance, Fairleigh Dickinson University Teaneck, New Jersey 07666, USA
Xiaobing Zhao: The W. A. Franke College of Business, PO Box 15066, Northern Arizona University, Flagstaff, AZ 86011, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2011, vol. 14, issue 02, 297-325

Abstract: The main purpose of this paper is to show that the lack of misreaction to common information in previous research may be due to methodological weakness. As of now, there is no evidence which suggests that stocks under-react to common information at short horizons and over-react at longer horizons. Even if stocks under- and/or over-react to common information at the security level, the reaction pattern may not be evident at the market level if only some stocks have such a pattern and their capitalization is small. We show in this manuscript that the lack of misreaction to common information in previous research may be due to methodological weakness. By focusing on the stock level reaction, we find a statistically and economically significant reaction pattern to common information as the behavioral models suggest. This finding thus complements the findings of stock misreaction to firm-specific information, and may benefit researchers attempting to understand investor behavior.

Keywords: Market-wide information; intangible information; size factor; behavioral models of asset pricing (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091511002263
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:14:y:2011:i:02:n:s0219091511002263

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091511002263

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().