Abstract

http://ssrn.com/abstract=438942
 
 

Citations



 


 



Does Greater Firm-specific Return Variation Mean More or Less Informed Stock Pricing?


Art Durnev


University of Iowa - Henry B. Tippie College of Business

Randall Morck


University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER)

Bernard Yin Yeung


National University of Singapore - Business School

Paul Zarowin


New York University (NYU) - Department of Accounting, Taxation & Business Law


Journal of Accounting Research, Forthcoming

Abstract:     
Roll [1988] observes low R2 statistics for common asset pricing models due to vigorous firms-specific return variation not associated with public information. He concludes (p. 56) that this implies "either private information or else occasional frenzy unrelated to concrete information." We show that firms and industries with lower market model R2 statistics exhibit higher association between current returns and future earnings, indicating more information about future earnings in current stock returns. This supports Roll's first interpretation - higher firms-specific return variation as a fraction of total variation signals more information-laden stock prices and, therefore, more efficient stock markets.

JEL Classification: G12, G14, M41

Accepted Paper Series





Not Available For Download

Date posted: October 17, 2003  

Suggested Citation

Durnev, Art and Morck, Randall and Yeung, Bernard Yin and Zarowin, Paul, Does Greater Firm-specific Return Variation Mean More or Less Informed Stock Pricing?. Journal of Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=438942

Contact Information

Artyom Durnev (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)
HOME PAGE: http://www.artdurnev.com
Randall K. Morck
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Bernard Yin Yeung
National University of Singapore - Business School ( email )
1 Business Link
Biz 2 Building Level 6
Singapore 117592
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)
Paul Zarowin
New York University (NYU) - Department of Accounting, Taxation & Business Law ( email )
40 West 4th Street, Suite 400
422 Tisch Hall
New York, NY 10012-1118
United States
212-998-0015 (Phone)
212-995-4004 (Fax)
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