What Moves Stock Prices? The Role of News, Noise, and Information

AFA Annual Meeting 2020, Forthcoming

69 Pages Posted: 29 Jan 2018 Last revised: 13 Sep 2019

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Thanh Huong Nguyen

University of Technology Sydney (UTS) - UTS Business School

Tālis J. Putniņš

University of Technology Sydney (UTS); Stockholm School of Economics, Riga

Eliza Wu

The University of Sydney - Business School; Financial Research Network (FIRN)

Date Written: September 1, 2019

Abstract

We develop a return variance decomposition model to separate the role of different types of information and noise in stock price movements. We disentangle four components: market-wide information, private firm-specific information revealed through trading, firm-specific information revealed through public sources, and noise. Overall, 31% of the return variance is from noise, 37% from public firm-specific information, 24% from private firm-specific information, and 8% from market-wide information. Since the mid-1990s, there has been a dramatic decline in noise and an increase in firm-specific information, consistent with increasing market efficiency.

Keywords: variance decomposition, firm-specific information, market-wide information, stock return synchronicity

JEL Classification: G12, G14, G15

Suggested Citation

Brogaard, Jonathan and Nguyen, Thanh Huong and Putnins, Talis J. and Wu, Eliza, What Moves Stock Prices? The Role of News, Noise, and Information (September 1, 2019). AFA Annual Meeting 2020, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3105862 or http://dx.doi.org/10.2139/ssrn.3105862

Jonathan Brogaard

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Thanh Huong Nguyen

University of Technology Sydney (UTS) - UTS Business School ( email )

Sydney
Australia

Talis J. Putnins (Contact Author)

University of Technology Sydney (UTS) ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia
+371 67015841 (Phone)

Eliza Wu

The University of Sydney - Business School ( email )

University of Sydney
Darlington
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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