The Sensitivity of Stock Price Informativeness Based on AdjPIN Measure to Risk Sharing

Abstract

Abstract:

Based on the first unlocking event, after the Split-Share Structure Reform plan implementation, from the combination of ownership structure and financial market microstructure, we test the sensitivity of stock price informativeness to risk sharing. We use adjusted probability of information based trading (AdjPIN) as the proxy for stock price informativeness, investor base as the proxy for risk sharing. After controlling the heterogeneity factors of the company level and market factor, the results show that stock price informativeness decreases significantly when investor base enlarges. This finding supports the risk sharing hypothesis proposed by Peress^[3]. Furthermore, we find institutional investors have no significant impact on the stock price informativeness, showing that the increment consists mainly of homogenous investors. In the case of homogeneous investor base, informativeness falls, returns fall and the variances of returns rise. This conclusion is consistent with Peres^[3]'s proposition 6. The interaction terms of the state holding variable SOE and associated variables are introduced to examine the different effects of private firms and state holding companies on price informativeness. We find that there are different channels of influencing share price information. Additionally, we find that the change of the price informativeness around the first unlocking is positively related to the magnitude of abnormal investment returns following the first unlocking and state-owned enterprises have a mitigating effect on the positive correlation between them.

Key words: the Split-Share Structure Reform, investor base, risk sharing, stock price informativeness, AdjPIN

Zhou Jing, Luo Le. The Sensitivity of Stock Price Informativeness Based on AdjPIN Measure to Risk Sharing[J]. , 2020, 32(4): 77-89.

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