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The effect of equity market uncertainty on informational efficiency: Cross-sectional evidence

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  • Frijns, Bart
  • Indriawan, Ivan
  • Tourani-Rad, Alireza
  • Zhang, Hengbin

Abstract

We study the effect of equity market uncertainty (EMUNC) on the informational efficiency of U.S. equity prices. Based on the findings, EMUNC negatively affects informational efficiency, i.e., as EMUNC increases, equity prices become less efficient. More importantly, this negative impact is heterogeneous in the cross-section of stocks, with a stronger negative impact on hard-to-arbitrage stocks. We also find that stocks with a higher historical uncertainty exposure are more sensitive to EMUNC.

Suggested Citation

  • Frijns, Bart & Indriawan, Ivan & Tourani-Rad, Alireza & Zhang, Hengbin, 2023. "The effect of equity market uncertainty on informational efficiency: Cross-sectional evidence," Global Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000492
    DOI: 10.1016/j.gfj.2023.100854
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    More about this item

    Keywords

    Equity market uncertainty; Informational efficiency; Cross-section;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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