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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27594
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| Title: | Does Greater Firm-specific Return Variation Mean More or Less Informed
Stock Pricing? |
| Authors: | Durnev, Artyom
Morck, Randall
Yeung, Bernard
Zarowin, Paul |
| Issue Date: | 21-May-2001 |
| Series/Report no.: | Paul Zarowin-05 |
| Abstract: | Roll (1988) observes low R2 statistics for common asset pricing models
due to vigorous firms-specific returns variation not associated with
public information. He concludes (p. 56) that this implies “either
private information or else occasional frenzy unrelated to concrete
information.” We show that firms and industries with lower market
model R2 statistics exhibit higher association between current returns
and future earnings, indicating more information about future earnings
in current stock returns. This supports Roll’s first
interpretation – higher firms-specific returns variation as a
fraction of total variation signals more information-laden stock prices
and, therefore, more efficient stock markets. |
| URI: | http://hdl.handle.net/2451/27594 |
| Appears in Collections: | Accounting Working Papers
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