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Oil price uncertainty and stock price informativeness: Evidence from investment-price sensitivity in China

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  • Zhu, Qi
  • Jin, Sisi
  • Huang, Yuxuan
  • Yan, Cheng
  • Chen, Chuanglian

Abstract

We study the effects of oil price uncertainty (OPU) on stock price informativeness based on investment-price sensitivity. Using Chinese stocks from 2008 to 2021, we find a negative relationship between OPU and the strength of Tobin's q (a standardized measure of prices) for predicting investment opportunities. This finding is likely due to the crowding out of informed investors rather than the financial constraints brought by a higher cost of capital. Investment-price sensitivity also decreases more among firms in less-competition, high sales volatility, and lower analysts' attention. What is more, the reduction in investment-price sensitivity is more concentrated in public utilities, agriculture & livestock, and industry instead of in real estate or commerce industries. These findings indicate that OPU decreases the acquisition of information related to firms, and consequently, price informativeness for future investment decisions.

Suggested Citation

  • Zhu, Qi & Jin, Sisi & Huang, Yuxuan & Yan, Cheng & Chen, Chuanglian, 2022. "Oil price uncertainty and stock price informativeness: Evidence from investment-price sensitivity in China," International Review of Financial Analysis, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003271
    DOI: 10.1016/j.irfa.2022.102377
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    More about this item

    Keywords

    OPU; Stock price informativeness; Investment; Tobin's q; Managerial learning;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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