R~2:Information Or Noise?

The question whether R2 represents information or noise is still a fundamental question in the study of stock price synchronicity.There are two main difficulties.Firstly,the individual information of a company is hard to measure;Secondly,the investor sophistication is ignored when we discuss the effectiveness of market.Through the study of SSE E-interaction platform and the measurement by textual analysis method,this article exams the effect of the increase of investors’ sophistication on the stock synchronicity.This article argues that the improvement of investor sophistication declines the stock price synchronicity.In the further investigation,this result is more salient in companies with lower opacity or with higher corporate governance.In addition,this article finds that price information from insider trading will diminish the correlation of stock price synchronicity and investor sophistication.These results indicate that the investor sophistication negatively influence the stock synchronicity,standing for the theory of information efficiency.This article contributes to the deepen understanding of stock price synchronicity in Chinese market and the future development of e-Interaction platform.