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Transparency, price informativeness, and stock return synchronicity: theory and evidence

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Transparency, price informativeness, and stock return synchronicity: theory and evidence. / Dasgupta, Sudipto.
In: Journal of Financial and Quantitative Analysis, Vol. 45, No. 5, 10.2010, p. 1189-1220.

Research output: Contribution to Journal/MagazineJournal articlepeer-review

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Dasgupta S. Transparency, price informativeness, and stock return synchronicity: theory and evidence. Journal of Financial and Quantitative Analysis. 2010 Oct;45(5):1189-1220. Epub 2010 Aug 20. doi: 10.1017/S0022109010000505

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Dasgupta, Sudipto. / Transparency, price informativeness, and stock return synchronicity : theory and evidence. In: Journal of Financial and Quantitative Analysis. 2010 ; Vol. 45, No. 5. pp. 1189-1220.

Bibtex

@article{b7f886e4e7b740d18983a1912499308e,
title = "Transparency, price informativeness, and stock return synchronicity: theory and evidence",
abstract = "This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less newinformation is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empiricalsupport for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).",
author = "Sudipto Dasgupta",
year = "2010",
month = oct,
doi = "10.1017/S0022109010000505",
language = "English",
volume = "45",
pages = "1189--1220",
journal = "Journal of Financial and Quantitative Analysis",
issn = "0022-1090",
publisher = "Cambridge University Press",
number = "5",

}

RIS

TY - JOUR

T1 - Transparency, price informativeness, and stock return synchronicity

T2 - theory and evidence

AU - Dasgupta, Sudipto

PY - 2010/10

Y1 - 2010/10

N2 - This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less newinformation is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empiricalsupport for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).

AB - This paper argues that, contrary to the conventional wisdom, stock return synchronicity (or R2) can increase when transparency improves. In a simple model, we show that, in more transparent environments, stock prices should be more informative about future events. Consequently, when the events actually happen in the future, there should be less “surprise” (i.e., less newinformation is impounded into the stock price). Thus a more informative stock price today means higher return synchronicity in the future. We find empiricalsupport for our theoretical predictions in 3 settings: namely, firm age, seasoned equity offerings (SEOs), and listing of American Depositary Receipts (ADRs).

U2 - 10.1017/S0022109010000505

DO - 10.1017/S0022109010000505

M3 - Journal article

VL - 45

SP - 1189

EP - 1220

JO - Journal of Financial and Quantitative Analysis

JF - Journal of Financial and Quantitative Analysis

SN - 0022-1090

IS - 5

ER -