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The influences of information demand and supply on stock price synchronicity

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Listed:
  • Yu-Fen Chen

    (Da-Yeh University)

  • Cheng-Few Lee

    (Rutgers University)

  • Fu-Lai Lin

    (Da-Yeh University)

Abstract

This study investigates how information flow affects the determinants of stock price synchronicity, with a focus on the role of investors' information demand and supply. We analyze quarterly data for S&P500 constituents from 2010 to 2020, using Google search volume index and media coverage as a proxy for information demand and supply, respectively. Our results show that higher information demand lowers stock price synchronicity, as greater interest in a firm exposes more firm-specific information. We also find a negative association between media coverage and stock price synchronicity, implying that media coverage helps stock prices better reflect firm-specific information. The tone of news further moderates this negative effect. However, our analysis does not confirm a stronger negative relationship between media coverage and stock price synchronicity for firms with more opaque information environments. Overall, our study offers new insights into the impact of information flow on stock price synchronicity, benefiting investors and policy makers in portfolio allocation and financial market monitoring.

Suggested Citation

  • Yu-Fen Chen & Cheng-Few Lee & Fu-Lai Lin, 2023. "The influences of information demand and supply on stock price synchronicity," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 1151-1176, October.
    • Handle: RePEc:kap:rqfnac:v:61:y:2023:i:3:d:10.1007_s11156-023-01183-y
    DOI: 10.1007/s11156-023-01183-y
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    More about this item

    Keywords

    Stock price synchronicity; Investor attention; Media coverage; News tone; Firm-specific information environment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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