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Authors
Advisor(s)
Abstract(s)
Recent research uses the degree of stock returns co-movement as a measure of the
quality of a country’s information environment. It has been argued that stronger
property rights, better corporate governance regimes and more efficient enforcement
mechanisms lead to prices incorporating more firm-specific information and,
therefore, co-moving less with the market. In this paper, we use a much more
comprehensive international data set than in prior research, encompassing forty
countries over twenty years, to evaluate the reliability of this approach in a crosscountry
setting and to analyse the behaviour of the measure used. Our results
demonstrate severe limitations in the use of co-movement as measure of information
quality. We highlight the instability of the measure and show that it can produce
results that are often difficult to reconcile with such an informational explanation.
Description
Keywords
Information R² firm-specific information market-wide information volatility disclosures co-movement cross-country information environment
Pedagogical Context
Citation
Working Papers Management. nº 2. 2009. 30p. Available at RePEc - Econpapers at: http://econpapers.repec.org/paper/capmpaper/