TY - JOUR
T1 - Market Development, Information Diffusion, and the Global Anomaly Puzzle
AU - Cai, Charlie
AU - Keasey, Kevin
AU - Li, Peng
AU - Zhang, Qi
PY - 2023/2/11
Y1 - 2023/2/11
N2 - Previous literature finds anomalies are at least as prevalent in developed markets as in emerging markets; namely, the global anomaly puzzle. We show that while market development and information diffusion are linearly related, information diffusion has a nonlinear impact on anomalies. This is consistent with theoretical developments concerning the process of information diffusion. In extremely low-efficiency regimes, without newswatchers sowing the seeds of price discovery and ensuring the long-run convergence of price to fundamentals, initial mispricing and subsequent correction will not occur. The concentration of emerging countries in low-efficiency regimes provides an explanation to the puzzle.
AB - Previous literature finds anomalies are at least as prevalent in developed markets as in emerging markets; namely, the global anomaly puzzle. We show that while market development and information diffusion are linearly related, information diffusion has a nonlinear impact on anomalies. This is consistent with theoretical developments concerning the process of information diffusion. In extremely low-efficiency regimes, without newswatchers sowing the seeds of price discovery and ensuring the long-run convergence of price to fundamentals, initial mispricing and subsequent correction will not occur. The concentration of emerging countries in low-efficiency regimes provides an explanation to the puzzle.
UR - http://www.scopus.com/inward/record.url?scp=85134808689&partnerID=8YFLogxK
U2 - 10.1017/S0022109022000643
DO - 10.1017/S0022109022000643
M3 - Article
SN - 0022-1090
VL - 58
SP - 104
EP - 147
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 1
ER -