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Industry Information Diffusion and the Lead-lag Effect in Stock Returns

  • Kewei Hou

I argue that the slow diffusion of industry information is a leading cause of the lead-lag effect in stock returns. I find that the lead-lag effect between big firms and small firms is predominantly an intra-industry phenomenon. Moreover, this effect is driven by sluggish adjustment to negative information, and is robust to alternative determinants of the lead-lag effect. Small, less competitive and neglected industries experience a more pronounced lead-lag effect. The lead-lag effect is related to the post-announcement drift of small firms following the earnings releases of big firms within the industry. , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/rfs/hhm003
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Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 20 (2007)
Issue (Month): 4 ()
Pages: 1113-1138

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Handle: RePEc:oup:rfinst:v:20:y:2007:i:4:p:1113-1138
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