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

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

16 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)67-81
Journal / PublicationInternational Review of Economics and Finance
Volume33
Online published24 Mar 2014
Publication statusPublished - Sep 2014
Externally publishedYes

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.

Research Area(s)

  • Earnings, Pricing efficiency, R-square, Reprimanding disclosure, Synchronicity