An Empirical Research On How The Information Frequency Affect The Stock Valuation

The information is the basis of the securities market.In the process of stockinvestment decision,the information plays a very important role.And the informationis also the basis of equity valuation. At the same time the information is the key factorto the healthy development of the securities market.The process of the securitiesmarket is also an information processing process. Scholars at home and abroadgenerally have carried on the thorough research on information ecanomics.In1965,Fama put forward the famous “the Efficient Market Hypothesis”in hisarticle,named “the stock market price behavior”.Efficient Market Hypothesis(EMH)isone of the most important and the most controversial concept in the financialtheory.According to this theory,in a perfect valid market,the stock price reactions toearnings information on the company’s report should be timely and sufficient.In sucha market,through the analysis of the income information, no one can take theinvestment strategy to gain the higher than market yields.That means no one can getabnormal returns.However,with the deeping research about the effective market,the academicsfound that the empirical results revealed the fact is not the case.Ball and Bromn(1968)based on the New York stock exchange, listed the261companies from1946to1965,made a research on their stock price during the time before the12months to6months to the accounting earnings information disclosure.The results shows thatthere is abnormal returns in the market.And the stock price of the combination of“good news”continue to drift upwards before and after the announcement.The stock price of the combination of “bad news” continued downward drift.Chinese scholarsZhang Junxi and Zhang Hua(2003)based on the Shang Hai stock exchange,listed allthe companies from1996-1999,made a detailed study.It reveals that before theearnings announcement and on the first day of trading after the earningsannouncement,there has a strong positive correlation between the earnings changesand the share price.And then this positive relationship has ceased to exist,and after theearnings announcement,the profitability company’s share price rose fastest.RuanYi(2003)and other scholars made an analysis to the Shen Zhen A shares before2000.They found that the income data is contrast to the stock price movement.Aftersummarizing domestic and foreign literature,we found that accounting earnings datais a signal.But how the signal effects the stock price,the academia hasn’t gave asatisfied and consistent answer.So,this article does not draw a distinction between thesignal(regardless of good or bad).I analyze from another dimension,namely therelationship between the frequency information and the stock valuation.I want toprove that the information had a delaying effect and a curving effect.This paper studies the relationship between the information disclosure frequencyand the degree of share price volatiliy. This paper uses the Information Perspectivemethod.This paper is based on the relevant theories of informationeconomics,choosing the Shanghai and Shenzhen markets’ stocks,which are from2006to2010.In this paper,I use the cumulative abnormal return(CAR) and the meandeviation in price to mark price fluctuation.I use the number of information releasedby the listed company between the adjacent annual report to mark the informationfrequency.First of all,through the normative analysis,I put forward the hypothesis ofInformation Curving Effect.Secondly,using the Information Perspective’s method toanalyze information frequency’s impact on the cumulative abnormal return(CAR) toprove the existence of the Information Delaying Effect.Finally,I analyze therelationship between the information frequency and the mean deviation price in order to prove the Information Curving Effect.Research results show that our country securities market’s information frequencyhas the market effect,the information frequency has an impact on the stockvaluation.First,after analysis of this article,we found that there is delaying effect inChina securities market.I found that the information frequency has a negative impacton the the cumulative abnormal return(CAR).This shows that with the increase of theinformation frequency,the market is enhancing its effectiveness.Second,theinformation frequency’s impact on the cumulative abnormal return is becoming moreand more remarkable over time.This suggests that the market needs a long process todigest the information.So it proves the Information Delaying Effect.Second,afteranalysis,we found that the effect from information frequency to mean deviation pricevaried from positive to negative as the information frequence increasing.Thatmeans,we found that Chinese securities market has the Information Curving Effect.