The effect of equity market uncertainty on informational efficiency: Cross-sectional evidence

B Frijns, I. Indriawan, A. Tourani-Rad, Hengbin Zhang*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We study the effect of equity market uncertainty (EMUNC) on the informational efficiency of U.S. equity prices. Based on the findings, EMUNC negatively affects informational efficiency, i.e., as EMUNC increases, equity prices become less efficient. More importantly, this negative impact is heterogeneous in the cross-section of stocks, with a stronger negative impact on hard-to-arbitrage stocks. We also find that stocks with a higher historical uncertainty exposure are more sensitive to EMUNC.

Original languageEnglish
Article number100854
Number of pages20
JournalGlobal Finance Journal
Volume57
DOIs
Publication statusPublished - Aug 2023

Keywords

  • Cross-section
  • Equity market uncertainty
  • Informational efficiency

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