Rumors in the sky: Corporate rumors and stock price synchronicity |
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| Institution: | 1. Business School, Soochow University, 50 Donghuan Road, Suzhou 215000, China;2. School of Management, Fudan University, 670 Guoshun Road, Shanghai 200433, China;1. Centre for Entrepreneurship & Organizational Excellence, College of Business & Economics, Qatar University, Qatar;2. Faculty of Management, Economics & Sciences, Lille Catholic University, UMR 9221-LEM-Lille Économie Management, F-59000 Lille, France;3. UMI SOURCE, University Paris-Saclay, UVSQ, IRD, France; Paris School of Business, PSB, 59 rue Nationale, 75013, Paris, France;1. College of Finance, Nanjing Agricultural University, Nanjing 210095, China;2. School of Advanced Agricultural Sciences, Peking University, Beijing 100871, China;3. Business School, Hohai University, Nanjing 211100, China;1. Center for Quantitative Economics of Jilin University, Changchun 130012, PR China;2. Business and Management School of Jilin University, Changchun 130012, PR China;3. Economics School of Changchun University, Changchun 130021, PR China;1. University of the Aegean, Department of Business Administration, Greece;2. University of Piraeus, Department of Maritime Studies, 21 Lampraki & Distomou Str., 851833 Piraeus, Greece;1. School of Mathematics and Finance, Anhui Polytechnic University, Wuhu, China;2. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China;3. Data-Driven Management Decision Making Lab, Shanghai Jiao Tong University, Shanghai, China |
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| Abstract: | Using hand-collected rumor clarification announcements from Chinese listed firms to identify corporate rumors, we find that rumored firms have lower stock price synchronicity (R2) than do firms without rumors. Channel analyses reveal that rumors reduce stock price synchronicity through elevating investor sentiment rather than stimulating informed trading. Additionally, the negative association between corporate rumors and stock price synchronicity is more evident among firms with more individual investors and higher information opacity. Moreover, corporate rumors are associated with higher analyst forecast errors and forecast dispersion. Overall, our evidence suggests that corporate rumors reduce stock price synchronicity by increasing investor irrationality. |
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