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Private Information Production and the Efficiency of Intra-Industry Information Transfers

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  • Jingjing Xia

    (College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325015, China)

Abstract

This paper challenges the prevailing view that intra-industry information transfers are primarily driven by public information. Contrary to conventional wisdom, I find that investors in late-announcing firms impound more private information after early-announcing peers report earnings. This increase is substantial, leading to an 18.2% decrease in analyst forecast consensus and a 24.9% increase in forecast precision. Moreover, the probability of informed trading rises by 2% on days with peer announcements. This finding is important because investors tend to overweight (underweight) private (public) signals, thereby exacerbating over- and underreaction anomalies. Our study confirms that these anomalies are more pronounced when early announcements stimulate private information production, offering a theoretical explanation for their puzzling coexistence. These findings have significant implications for investor behavior and market efficiency. Investors should diligently evaluate both public and private information, particularly following peer announcements. Policymakers can leverage these findings to design regulations that promote transparency and foster efficient information dissemination.

Suggested Citation

  • Jingjing Xia, 2025. "Private Information Production and the Efficiency of Intra-Industry Information Transfers," JRFM, MDPI, vol. 18(1), pages 1-25, January.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:1:p:42-:d:1570874
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    References listed on IDEAS

    as
    1. Dyer, Travis A., 2021. "The demand for public information by local and nonlocal investors: Evidence from investor-level data," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    2. Durnev, Art & Mangen, Claudine, 2020. "The spillover effects of MD&A disclosures for real investment: The role of industry competition," Journal of Accounting and Economics, Elsevier, vol. 70(1).
    3. Meng Gao & Jiekun Huang & Itay Goldstein, 2020. "Informing the Market: The Effect of Modern Information Technologies on Information Production," The Review of Financial Studies, Society for Financial Studies, vol. 33(4), pages 1367-1411.
    4. repec:bla:jfinan:v:53:y:1998:i:6:p:1839-1885 is not listed on IDEAS
    5. Hung, Chiayu & Lai, Hung-Neng, 2022. "Information asymmetry and the profitability of technical analysis," Journal of Banking & Finance, Elsevier, vol. 134(C).
    6. Meng Gao & Jiekun Huang & Itay GoldsteinEditor, 2020. "Informing the Market: The Effect of Modern Information Technologies on Information Production," Review of Finance, European Finance Association, vol. 33(4), pages 1367-1411.
    Full references (including those not matched with items on IDEAS)

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