In a given country, a higher R2 suggests that stocks move more synchronously with other stocks. This study explores whether five dimensions of national culture are related to stock price synchronicity in developed countries across the globe. Our findings demonstrate that long-term orientation and uncertainty avoidance are positively related to R2, while individualism, masculinity, and power distance are negatively related to R2. Since a lower R2 could signal better incorporation of information into stock prices, our evidence has broader implications for the influence of culture on market efficiency around the world.

This paper argues that firms in certain life cycle stages may be more subjectively valued by individual investors, leading to an optimistic bias in stock prices that is subsequently corrected upon the release of earnings news. Using a cash flow-based life cycle stage classification, introduction and decline stage companies exhibit three-day cumulative abnormal returns (CARs) around earnings announcements that are at least 112 bps lower than firms in growth, maturity, and shake-out stages. Specifically, introduction and decline stage stocks exhibit less positive reactions to positive earnings surprises and more negative reactions to negative earnings surprises relative to companies in other life cycle stages. Lottery stocks’ excess returns around earnings announcements (Liu et al. in Journal of Financial Economics 138: 789–817, 2020 ) also vary based on firm life cycle stage. Our findings suggest that individual investors’ optimistic expectations for introduction and decline stage stocks are met with disappointment when value-relevant earnings news is released. This study demonstrates that firm life cycle stage has real implications for stock price reactions to earnings announcements.