Information, Competition, and Investment Sensitivity to Peer Stock Prices

50 Pages Posted: 3 May 2018

See all articles by Arzu Ozoguz

Arzu Ozoguz

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management

Malcolm Wardlaw

University of Georgia

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2018

Abstract

We examine the response of investment to peers' stock prices. While the response to average peer-Q is typically positive, the response to prices of peer firms that are more threatening and those of industry leaders is reliably negative. The responses are more strongly negative when the prices contain more firm-specific information. We also show that different measures of peer price informativeness can capture either positive or negative investment signals. Thus, the response to peer prices varies with industry competition and whether the prices reflect firm-specific or industry information, clouding the traditional interpretation of variation in the responses to peers prices.

Keywords: Corporate Investment, Industrial Organization, Managerial learning, Peers

JEL Classification: G31, G14, L1

Suggested Citation

Ozoguz, Arzu and Rebello, Michael J. and Wardlaw, Malcolm, Information, Competition, and Investment Sensitivity to Peer Stock Prices (April 5, 2018). SMU Cox School of Business Research Paper No. 18-24. Available at SSRN: https://ssrn.com/abstract=3164386 or http://dx.doi.org/10.2139/ssrn.3164386

Arzu Ozoguz

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Malcolm Wardlaw (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

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