Does Stock Price Synchronicity Represent Firm-Specific Information? The International Evidence

Hollis Ashbaugh Skaife, Joachim Gassen, Ryan LaFond
2006 Social Science Research Network  
Much of prior international accounting research implicitly assumes that stock prices capture similar amounts of firm-specific information across countries. Recent research asserts that stock price synchronicity, defined as the R 2 from asset pricing regressions, is a useful measure of the amount of firm-specific information impounded in stock prices in international markets. However, the results of our empirical tests provide little support for using stock price synchronicity as a measure of
more » ... m-specific information internationally. We develop an alternative measure of firm-specific information impounded in stock price based on the percentage of zero-return days, i.e., the zero-return metric, and repeat the analyses. Overall, our results suggest that the zero-return metric is a better measure of firm-specific information impounded into share prices than the synchronicity measure internationally. of Capital.
doi:10.2139/ssrn.768024 fatcat:h7elgvvd4rgzrlus5bdfxd4fqy