Рожнов Никита Вадимович
Amount of Available Information. Effects on Companies Financial Performance
This paper analyses effects of companies’ publicity on different financial characteristics of securities, specifically volatility and illiquidity of these securities. The publicity is defined in accordance with the number of public news available about a company. The analysis is performed on the basis of daily data for more than 10 years for a portfolio of 44 stocks from S&P 500. The research is conducted with help of modern econometric techniques including GARCH and EGARCH models. Regression equations are based on previous papers, which analysed determinants of volatility and illiquidity. At first, models are tested in their initial specification to make sure that the data fits this specification. Then, models are modified to: (i) better reflect special features of the collected data, (ii) account for new explanatory variables. Results of this research provide additional evidence of findings presented in Chen, Firth, and Rui, 2001, and, to a small extent, in Amihud, 2002. Moreover, statistically significant effects of publicity on both volatility and illiquidity are found: an increase in company’s publicity leads to an increase in this company security’s volatility and to a decrease in this company security’s illiquidity. Although these results are statistically significant, a further investigation is needed to shed some light on the nature of these effects and to understand how they behave simultaneously. At the current state, this paper may be useful for researchers who are interested in the further analysis of publicity effects on other financial variables as it provides: (i) a theoretical basis and justification for existence of these effects, (ii) an empirical evidence of existence of these effects at least on security’s volatility and liquidity, (iii) a detailed database with public news about 310 S&P 500 companies collected for a time period of more than 10 years. A clarification of this paper’s result will make them more useful for companies’ management.