Commonality in News Around the World

58 Pages Posted: 6 Jan 2016 Last revised: 9 Jan 2016

See all articles by Tung Lam Dang

Tung Lam Dang

The University of Danang

Fariborz Moshirian

Institute of Global Finance, UNSW Business School

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Date Written: January 6, 2016

Abstract

Motivated by the pioneering study of Morck, Yeung, and Yu (2000), this paper investigates whether and how news commonality varies according to a country’s institutional environments. Using a unique global news data set across 41 countries for the 2000-2009 period, we document three notable findings. First, firm-level news comoves more in countries with weaker institutional environments than in those with stronger institutional environments. Second, news commonality is positively associated with both stock return comovement and stock liquidity commonality. Third, the effect of news commonality on stock return and liquidity comovement is higher in countries with stronger institutions than in those with weaker institutions. These results suggest that a country’s institutional environments affect firm-specific information production and, more importantly, support the information-efficiency view that lower price synchronicity is caused by greater capitalization of firm-specific information.

Keywords: News commonality, information production, institutional environments, stock return comovement, stock liquidity commonality

JEL Classification: G14, G15, G18

Suggested Citation

Dang, Tung Lam and Moshirian, Fariborz and Zhang, Bohui, Commonality in News Around the World (January 6, 2016). Journal of Financial Economics (JFE), 2015, Available at SSRN: https://ssrn.com/abstract=2711726 or http://dx.doi.org/10.2139/ssrn.2711726

Tung Lam Dang

The University of Danang ( email )

41 Le Duan street
Danang
Vietnam

Fariborz Moshirian

Institute of Global Finance, UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Bohui Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

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