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Is stock price informativeness shaped by our genes?

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  • Todea, Alexandru
  • Petrescu, Daiana Florina

Abstract

Do deeply rooted genetic traits, dating thousands of years, affect how information is impounded into stock prices nowadays? It is an intriguing idea, but one that stems from several studies that support the underlying economic intuition because genetic factors affect psychological traits, such as trust and creativity, that are known to influence price informativeness. Using data from 42 countries during 2004–2016, we investigate the impact of genetic diversity on stock price informativeness and find strong evidence in support of a hump-shaped relationship, that is, intermediate levels of genetic diversity are associated with high price informativeness and low/high genetic diversity is associated with low price informativeness. Institutional quality affects this relationship nonlinearly. Hence, improving the quality of institutions has positive effects on price informativeness, especially for nations with high/low genetic diversity.

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  • Todea, Alexandru & Petrescu, Daiana Florina, 2021. "Is stock price informativeness shaped by our genes?," Economic Modelling, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:ecmode:v:103:y:2021:i:c:s0264999321001851
    DOI: 10.1016/j.econmod.2021.105596
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    More about this item

    Keywords

    Stock price informativeness; Synchronicity; Private trading information; Genetic diversity; Institutional quality;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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