IDEAS home Printed from https://ideas.repec.org/a/aic/revebs/y2018j21todeaa.html
   My bibliography  Save this article

Culture And Stock Price Reaction To Private Information

Author

Listed:
  • ANITA TODEA

    (Department of Statistics, Forecasting, Mathematics, Faculty of Economics and Business Administration, Babes-Bolyai University, TeodorMihali 58-60, 400591 Cluj-Napoca, Romania. Tel. +40.264 41 86 52,)

Abstract

This paper examines the impact of culture on stock price informativeness in a sample of firms from 23 developed stock markets. We find that the information content of private information in stock prices is higher in more individualistic countries and in low uncertainty-avoiding countries. Moreover, financial openness stimulates the incorporation of private information into individualistic countries and in low uncertainty-avoiding countries.

Suggested Citation

  • Anita Todea, 2018. "Culture And Stock Price Reaction To Private Information," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 21, pages 117-130, June.
    • Handle: RePEc:aic:revebs:y:2018:j:21:todeaa
    as

    Download full text from publisher

    File URL: http://rebs.feaa.uaic.ro/articles/pdfs/259.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guillermo Llorente & Roni Michaely & Gideon Saar & Jiang Wang, 2002. "Dynamic Volume-Return Relation of Individual Stocks," The Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1005-1047.
    2. Shleifer, Andrei & Vishny, Robert W, 1997. "The Limits of Arbitrage," Journal of Finance, American Finance Association, vol. 52(1), pages 35-55, March.
    3. Nabamita Dutta & Deepraj Mukherjee, 2012. "Is culture a determinant of financial development?," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 585-590, April.
    4. Chan, Kalok & Chan, Yue-Cheong, 2014. "Price informativeness and stock return synchronicity: Evidence from the pricing of seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 114(1), pages 36-53.
    5. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    6. De Cesari, Amedeo & Huang-Meier, Winifred, 2015. "Dividend changes and stock price informativeness," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 1-17.
    7. Dow, James & Gorton, Gary, 1997. "Stock Market Efficiency and Economic Efficiency: Is There a Connection?," Journal of Finance, American Finance Association, vol. 52(3), pages 1087-1129, July.
    8. Tor-Erik Bakke & Toni M. Whited, 2010. "Which Firms Follow the Market? An Analysis of Corporate Investment Decisions," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1941-1980.
    9. Qi Chen & Itay Goldstein & Wei Jiang, 2007. "Price Informativeness and Investment Sensitivity to Stock Price," The Review of Financial Studies, Society for Financial Studies, vol. 20(3), pages 619-650.
    10. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    11. Todea, Alexandru & Buglea, Alexandra Maria, 2017. "Individualism and stock price reaction to market-wide information," Economics Letters, Elsevier, vol. 160(C), pages 4-6.
    12. Lucey, Brian M. & Zhang, QiYu, 2010. "Does cultural distance matter in international stock market comovement? Evidence from emerging economies around the world," Emerging Markets Review, Elsevier, vol. 11(1), pages 62-78, March.
    13. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    14. Moshirian, Fariborz & Qian, Xiaolin & Wee, Claudia Koon Ghee & Zhang, Bohui, 2017. "The determinants and pricing of liquidity commonality around the world," Journal of Financial Markets, Elsevier, vol. 33(C), pages 22-41.
    15. Philip Bond & Alex Edmans & Itay Goldstein, 2012. "The Real Effects of Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 339-360, October.
    16. Alex Edmans & Itay Goldstein & Wei Jiang, 2012. "The Real Effects of Financial Markets: The Impact of Prices on Takeovers," Journal of Finance, American Finance Association, vol. 67(3), pages 933-971, June.
    17. Thompson, Samuel B., 2011. "Simple formulas for standard errors that cluster by both firm and time," Journal of Financial Economics, Elsevier, vol. 99(1), pages 1-10, January.
    18. Beugelsdijk, Sjoerd & Frijns, Bart, 2010. "A cultural explanation of the foreign bias in international asset allocation," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2121-2131, September.
    19. Chan, Kalok & Hameed, Allaudeen, 2006. "Stock price synchronicity and analyst coverage in emerging markets," Journal of Financial Economics, Elsevier, vol. 80(1), pages 115-147, April.
    20. Nuno Fernandes & Miguel A. Ferreira, 2009. "Insider Trading Laws and Stock Price Informativeness," The Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1845-1887, May.
    21. Art Durnev & Randall Morck & Bernard Yeung, 2004. "Value-Enhancing Capital Budgeting and Firm-specific Stock Return Variation," Journal of Finance, American Finance Association, vol. 59(1), pages 65-105, February.
    22. Avanidhar Subrahmanyam & Sheridan Titman, 1999. "The Going‐Public Decision and the Development of Financial Markets," Journal of Finance, American Finance Association, vol. 54(3), pages 1045-1082, June.
    23. Dasgupta, Sudipto & Gan, Jie & Gao, Ning, 2010. "Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(5), pages 1189-1220, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Todea Anita, 2018. "Financial Literacy and Stock Price Informativeness: a Cross-Country Study," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 63(1), pages 63-72, April.
    2. De Cesari, Amedeo & Huang-Meier, Winifred, 2015. "Dividend changes and stock price informativeness," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 1-17.
    3. Ben-Nasr, Hamdi & Alshwer, Abdullah A., 2016. "Does stock price informativeness affect labor investment efficiency?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 249-271.
    4. Bennett, Benjamin & Stulz, René & Wang, Zexi, 2020. "Does the stock market make firms more productive?," Journal of Financial Economics, Elsevier, vol. 136(2), pages 281-306.
    5. Todea, Alexandru & Petrescu, Daiana Florina, 2021. "Is stock price informativeness shaped by our genes?," Economic Modelling, Elsevier, vol. 103(C).
    6. Hamdi Ben-Nasr & Abdullah Alshwer, 2015. "How Informed Stock Trading Can Affect Labor Investment Efficiency," Proceedings of Business and Management Conferences 2304077, International Institute of Social and Economic Sciences.
    7. Chue, Timothy K. & Gul, Ferdinand A. & Mian, G. Mujtaba, 2019. "Aggregate investor sentiment and stock return synchronicity," Journal of Banking & Finance, Elsevier, vol. 108(C).
    8. Foucault, Thierry & Fresard, Laurent, 2014. "Learning from peers' stock prices and corporate investment," Journal of Financial Economics, Elsevier, vol. 111(3), pages 554-577.
    9. Pereira da Silva, Paulo, 2021. "Do managers pay attention to the market? A review of the relationship between stock price informativeness and investment," Journal of Multinational Financial Management, Elsevier, vol. 59(C).
    10. Goldstein, Itay & Yang, Liyan, 2019. "Good disclosure, bad disclosure," Journal of Financial Economics, Elsevier, vol. 131(1), pages 118-138.
    11. Bibo Liu & Xuan Tian, 2022. "Do Venture Capital Investors Learn from Public Markets?," Management Science, INFORMS, vol. 68(10), pages 7274-7297, October.
    12. Andriansyah, Andriansyah, 2017. "The Real Effect of Primary and Secondary Equity Markets on Firm Performance: Evidence from Indonesia," MPRA Paper 116696, University Library of Munich, Germany.
    13. Rösch, Dominik M. & Subrahmanyam, Avanidhar & van Dijk, Mathijs A., 2022. "Investor short-termism and real investment," Journal of Financial Markets, Elsevier, vol. 59(PB).
    14. Xu, Liang, 2021. "Stock price informativeness and managerial inefficiency," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 348-364.
    15. Itay Goldstein, 2023. "Information in Financial Markets and Its Real Effects," Review of Finance, European Finance Association, vol. 27(1), pages 1-32.
    16. Fujun Lai & Sha Zhu & Qingxiang Feng & Yi Yao, 2021. "Effects of Financial Market Information on Firms’ Productivity Under Operating Pressure and Financial Constraints: Evidence From the Chinese Stock Market," SAGE Open, , vol. 11(4), pages 21582440211, November.
    17. Thanh Huong Nguyen, 2019. "Information and Noise in Stock Markets: Evidence on the Determinants and Effects Using New Empirical Measures," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 7-2019.
    18. Houdou Basse Mama, 2017. "The interaction between stock prices and corporate investment: is Europe different?," Review of Managerial Science, Springer, vol. 11(2), pages 315-351, March.
    19. Khanna, Naveen & Mathews, Richmond D., 2012. "Doing battle with short sellers: The conflicted role of blockholders in bear raids," Journal of Financial Economics, Elsevier, vol. 106(2), pages 229-246.
    20. Drobetz, Wolfgang & El Ghoul, Sadok & Guedhami, Omrane & Janzen, Malte, 2018. "Policy uncertainty, investment, and the cost of capital," Journal of Financial Stability, Elsevier, vol. 39(C), pages 28-45.

    More about this item

    Keywords

    price informativeness; private information; individualism; uncertainty avoidance; firm-specific information; financial opennes;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:revebs:y:2018:j:21:todeaa. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sireteanu Napoleon-Alexandru (email available below). General contact details of provider: https://edirc.repec.org/data/feaicro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.