The Relative Impact Of Public Information In Shaping Investor Expectations

Abstract

Empirical studies at the individual level (event studies) and those using more general measures of information and/or aggregate price movements often yield somewhat conflicting results regarding the relative importance of public information. Employing a more focused methodology that begins with no prior limitations on the number and types of public news announcements that may affect the underlying risk-return relationship, we are able to offer additional insight regarding the relative impact of public information. We find that approximately two-thirds of the changes can be associated with the arrival of public information. While, in general, this is a stronger link than previously found, it is a weaker link than expected; leading us to conclude that factors other than public information clearly play an important role. We also provide new results on the relative importance of different information types, and on correlates (such as firm size) of the effect of information.