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

Lin Chen

Junbo Wang

Chunchi Wu

Hongquan Zhu

Advances in Pacific Basin Business, Economics and Finance

ISBN: 978-1-83867-364-2, eISBN: 978-1-83867-363-5

Publication date: 9 September 2020

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.

Keywords

Acknowledgements

Acknowledgments

Hongquan Zhu acknowledges financial support from research grants from the National Science Foundation of China (No. 71473206 and 71773100).

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

Publisher

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Emerald Publishing Limited