Divergent Opinion, Trading Information, and Stock Price Co-movements

Abstract

Although stock price co-movement has been examined extensively, its causes are not well understood. Using a decomposition method, we extract three information components from the turnover rate: market information, firm-specific information, and investors' opinion divergence. We find that market information strengthens stock price co-movement, whereas firm-specific information weakens it. Moreover, our analysis shows that divergence of investors' opinion increases stock price variations but weakens price co-movement.

Citation

Chen, L., Wang, J., Wu, C. and Zhu, H. (2020), "Divergent Opinion, Trading Information, and Stock Price Co-movements", Lee, C.F. and Yu, M.-T. (Ed.) Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 8), Emerald Publishing Limited, Leeds, pp. 1-21. https://doi.org/10.1108/S2514-465020200000008001