Firm-specific investor sentiment, stock price synchronicity, and crash risk. Issue 4 (23rd February 2023)

• Record Type: Journal Article
• Authors: Zhang, Zhida; Chen, Runqiu; Luo, Qi
• Is Part Of: Applied economics letters. Volume 30:Issue 4(2023)
• Page Start: 450
• Page End: 455
• Publication Date: 2023-02-23
• Subjects: Firm-specific investor sentiment -- stock price synchronicity -- stock price crash risk -- Chinese stock market; G12 -- G14; Economics -- Periodicals; Economics, Mathematical -- Periodicals; 330
• DOI: 10.1080/13504851.2021.1991562
• Languages: English
• ISSNs: 1350-4851

Abstract

ABSTRACT: This article investigates the impact of firm-specific investor sentiment on stock price synchronicity and further examines the relationship between stock price synchronicity and crash risk. By analysing the dataset of the Chinese stock market, we find that higher firm-specific investor sentiment induces lower stock price synchronicity, which is inconsistent with the argument supported by a majority of previous studies that low price synchronicity represents high price informativeness. We also find a negative relationship between price synchronicity and future crash risk, supporting the view that in an irrational market, less return comovement is not associated with more firm-specific information but noise.