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Review of Financial Studies Vol. 35 No. 9 2022

What Moves Stock Prices? The Roles of News, Noise, and Information

Jonathan Brogaard1; Thanh Huong Nguyen2; Tālis J. Putniņš3,4; Eliza Wu5

1 University of Utah , USA · 2 University of Economics, The University of Danang , Vietnam · 3 University of Technology Sydney , Australia · 4 Stockholm School of Economics in Riga , Latvia · 5 University of Sydney , Australia

Abstract

We develop a return variance decomposition model to distinguish the roles of different types of information and noise in stock price movements. We disentangle four components: noise, private firm-specific information revealed through trading, firm-specific information revealed through public sources and market-wide information. Overall, we find that 31% of the return variance is from noise, 24% from private firm-specific information, 37% from public firm-specific information and 8% from market-wide information. Since the mid-1990s, there has been a dramatic decline in noise and an increase in firm-specific information, consistent with increasing market efficiency. The Internet Appendix that accompanies this paper can be obtained here: https://bit.ly/3FcV9UR

DOI
10.1093/rfs/hhab137
Volume
35
Issue
9
Pages
4341-4386
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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