Information Arrival, Changes in R-square and Pricing Asymmetry of Corporate News

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)33_Other conference paperNot applicable

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Author(s)

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Detail(s)

Original languageEnglish
StatePublished - 13 Jun 2011

Conference

Title9th INFINITI Conference on International Finance
LocationTrinity College Dublin
PlaceFinland
CityDublin
Period13 - 14 June 2011

Abstract

Past research on R-square focuses on the cross-sectional effects of Rsquare at level and the results are mixed. We argue that R-square change instead of R-square level can better capture how information is incorporated in stock prices. Based on Morck, Yeung and Yu (2000), we conjecture that, upon information arrival, R-square should decrease due to the increase of firm-level information from the announcements. 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. Employing various models to classify significantly positive and negative corporate announcements, the findings are consistent with our hypothesis. Moreover, the market is more reactive in pricing bad news than good news.

Research Area(s)

  • R-square, Synchronicity, Earnings, Pricing efficiency

Citation Format(s)

Information Arrival, Changes in R-square and Pricing Asymmetry of Corporate News. / Cheng, Louis T W; Leung, Yan; Yu, Wayne.

2011. 9th INFINITI Conference on International Finance, Dublin, Finland.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)33_Other conference paperNot applicable