The Relative Impact Of Public Information In Shaping Investor Expectations

Abstract

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-hyphenate: none;"><span style="font-family: "Times New Roman","serif"; letter-spacing: -0.1pt; font-size: 10pt;">Empirical studies at the individual level (event studies) and those using more general measures of information and/or aggregate price movements often yield somewhat conflicting results regarding the relative importance of public information.<span style="mso-spacerun: yes;">  </span>Employing a more focused methodology that begins with no prior limitations on the number and types of public news announcements that may affect the underlying risk-return relationship, we are able to offer additional insight regarding the relative impact of public information.<span style="mso-spacerun: yes;">  </span>We find that approximately two-thirds of the changes can be associated with the arrival of public information.<span style="mso-spacerun: yes;">  </span>While, in general, this is a stronger link than previously found, it is a weaker link than expected; leading us to conclude that factors other than public information clearly play an important role.<span style="mso-spacerun: yes;">  </span>We also provide new results on the relative importance of different information types, and on correlates (such as firm size) of the effect of information.</span></p>