Open AccessIndustry Structure and Stock Price Synchronicity
Author(s) -
Hao Cheng,
AUTHOR_ID,
Kian Guan Lim,
Long Wang,
AUTHOR_ID,
AUTHOR_ID
Publication year - 2021
Publication title -
journal of the asian real estate society
Language(s) - English
Resource type - Journals
ISSN - 1029-6131
DOI - 10.53383/100329
Subject(s) - synchronicity , real estate , corporate governance , decile , stock (firearms) , business , economics , financial economics , monetary economics , panel data , econometrics , finance , mechanical engineering , philosophy , statistics , mathematics , epistemology , engineering
This paper provides a non-information-based explanation to the stock pricesynchronicity for firms sorted by country, size-decile and industry sector. Using apanel of listed firms in 40 countries that span over 23 years, we find that thegovernance and the market size effects are highly collinear in predicting stock pricesynchronicity at the decile and the industry sector levels. Moreover, the effect islarger in the real estate industry than in the non-real estate industry. The channel ofinformation extraction by large firms and firms in markets with weak governance ofproperty rights cannot be easily disentangled. This study explores the industrystructure as an alternative explanation for the stock price synchronicity. Our proposedsales growth co-movement indices of firms exhibit highly significant and positiveeffects in driving price synchronicity after controlling for observed and unobservedcross sectional and temporal variations. Firms in a market with highly inter connectedbusiness networks have higher stock price synchronicity (R2 ). The results are robustand consistent, which do not hinge on whether a market is informationalefficient.