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Opacity and the comovement in the stock prices of banks
Author(s) -
Blau Benjamin M.,
Griffith Todd G.,
Whitby Ryan J.
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12507
Subject(s) - stock (firearms) , economics , monetary economics , opacity , intermediation , stock price , business , financial economics , finance , mechanical engineering , paleontology , series (stratigraphy) , biology , engineering , physics , optics
We examine whether the stock prices of banks co‐move more than the stock prices of non‐banks, and whether that comovement is driven by informational opacity. Since the risks associated with the financial intermediation process are relatively opaque to outside investors, valuing banks can be difficult and information acquisition can be costly. We introduce a measure of comovement, denoted as beta dispersion, that identifies how closely a particular stock co‐moves with the average industry CAPM beta. We find that bank stock prices generally co‐move more than non‐bank stock prices, and that opacity is driving the higher levels of comovement.