Multi-Source Information Interaction,Information Shocks,and Stock Return Characteristics

Information moves asset prices,meanwhile,asset return dynamics reflect information characteristics.The existing literature on information and stock price dynamics focuses on single-source information,ignoring the influence of multi-source information which is more consistent with the real market.Considering the interaction of multi-source information,this thesis studies the contribution of multi-source information to stock return volatilities,explores the market reaction to information shocks,and the relationship between fundamental information and stock price crash risk in a multi-source information environment.This study consists of three parts and the main investigations and contributions are summarized below.First,this thesis studies the impact of multi-source information(announcements,firm-related news,and analyst reports)on the stock return volatilities,filling the gap that existing literature focuses on single-source information in financial market.This study finds that news has the greatest impact on return volatilities,followed by announcements,and the impact of analyst reports is smallest.Results on the yearly contribution of multi-source information to return volatilities indicate that around the "market crisis",the contributions of announcements and analyst reports to return volatilities significantly increase,providing evidence for the hypothesis that the financial crisis increases information costs and reduces information benefit.Secondly,this thesis provides direct evidence of the significant relationship between multi-source information and stock price jumps,which proves the rationality of using stock price jumps as the proxy of information arrivals.The findings show that investors overreact to information shocks measured by daily jumps and intraday jumps.Compared with the existing literature,this study finds that investors’ over-attention rather than corporate earnings promotes the overreaction to information shocks,giving an explanation based on investor behavior for the overreaction in Chinese stock market.Finally,this thesis further studies the impact of fundamental information on stock price crash risk and verifies the significance of the impact in a multi-source information environment.The study empirically finds that higher profitability,higher operating efficiency help to resist future crash risk.The negative relation between fundamental strength and crash risk is prone for firms with more institutional investors,which proves the institutional short-termism in Chinese stock market.Based on the theory that information moves asset prices,this thesis promotes existing research by investigating the relation between multi-source information and return volatilities,market reaction to information shocks,the impact of fundamental information to stock price crash risk,providing a new perspective for studying the relationship between information and asset prices.The empirical results provide new evidence for the explanation of market overreaction and enrich the literature on crash risk based on the theory of information asymmetry.