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

Tsz Wan Cheng, T. Y. Leung, Wayne Yu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

12 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)67-81
Number of pages15
JournalInternational Review of Economics and Finance
Volume33
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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