Required Line of Business Reporting and Share Price Accuracy

106 Pages Posted: 9 Jul 2007 Last revised: 30 Jan 2013

See all articles by Art Durnev

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); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Merritt B. Fox

Columbia University - Law School

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: October 31, 2007

Abstract

The adjustment of prices after the arrival of new information is one of the most debated issues in finance. We use post-IPO market to examine this subject. The unique setting of immediate aftermarket allows us to assess the speed of price adjustment after the trading has just begun as investors possess little information about stock return properties. They are, therefore, likely to misinterpret firm-specific information in the immediate aftermarket. As time since IPO elapses, investors accumulate more information, and reaction to new events becomes more accurate. We show that during the first trading year, the speed of price adjustment increases by 14% in the first year of trading for both public and private events, and by as much as 26% for public events. We conclude that the incorporation of new information into stock prices becomes faster as stocks season.

Keywords: law and finance, securities law

JEL Classification: G14

Suggested Citation

Durnev, Artyom and Morck, Randall K. and Fox, Merritt B. and Yeung, Bernard Yin, Required Line of Business Reporting and Share Price Accuracy (October 31, 2007). 2nd Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=996924 or http://dx.doi.org/10.2139/ssrn.996924

Artyom Durnev

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
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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)

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Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Merritt B. Fox (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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