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

@article{Hou2003IndustryID,
  title={Industry Information Diffusion and the Lead-Lag Effect in Stock Returns},
  author={K. Hou},
  journal={Review of Financial Studies},
  year={2003},
  volume={20},
  pages={1113-1138}
}
  • K. Hou
  • Published 2003
  • Economics
  • Review of Financial Studies
  • 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… CONTINUE READING
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