Information, Competition, and Investment Sensitivity to Peer Stock Prices

50 Pages Posted: 3 May 2018  

Arzu Ozoguz

Southern Methodist University (SMU) - Finance Department; Rice University

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management

Malcolm Wardlaw

University of Michigan, Stephen M. Ross School of Business; University of Texas - Dallas

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

Southern Methodist University (SMU) - Finance Department ( email )

United States

Rice University ( email )

6100 Main St
Houston, TX Texas 77005
United States
9193455747 (Phone)

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 Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

University of Texas - Dallas ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States
972-883-5903 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
35
Abstract Views
149
PlumX