Speaker: Ping-Wen Sun, Jiangxi University of Finance and Economics
Host: Ji Wu, Associate professor, RIEM
Time: 14:30-16:00, April 10, Friday
Venue: Yide Building H503, Liulin Campus
Abstract: Hou and Moskowitz (2005) use the stock price delay in reflecting market-wide information to measure market frictions each individual firm faces. In this study, to better understand how the price formation process is affected by the business cycle, we examine the relation between changes in the aggregate stock price delay and changes in the economy. Surprisingly, while the stock market liquidity declines and market frictions increase before economic downturns, we find that the aggregate stock price delay decreases before recessions; and it increases before economic expansions when the stock market liquidity increases and market frictions decrease. After examining market frictions, information production, and flight-to-quality variables, we find changes in the stock market liquidity, changes in the aggregate institutional ownership, VIX, and stock market return are most responsible for the aggregate stock price delay change. Our result shows public available information travels faster in the downward part of a business cycle.
Keywords: Price delay, business cycle, flight-to-quality
