The Speed of Stock Price Adjustment to Market-Wide Information

Abstract

The speed of stock price adjustment to new information is central to market efficiency, and the price delay measure has emerged as a useful tool. This approach enables earlier studies to identify a set of factors responsible for delaying stock price adjustment to market-wide information. We argue that investor inattention and slow dissemination of information are two leading causes for underreaction, but the challenge lies at finding suitable empirical proxies to test these competing hypotheses. This paper also suggests and justifies a comparative study to assess whether the reactions to global market information vary widely across countries and why.