Essay on Sample Selection, Specification And Variable Construction

1431 Words Sep 18th, 2014 6 Pages
Sample Selection, Specification and Variable Construction We use the data of China’s stock market. Firm’s stock price, return information and intraday transaction data are from RESSET Financial Research Database. Firm’s fundamental information is from Wind Database. Our sample consists of an unbalanced panel of firms listed on the Shanghai and Shenzhen Exchange, from 2005 to 2010. We exclude firm-year observations with less than 50 days of trading activities in a year. Our final sample consists of 8,207 firm-year observations with 1,720 firms. Our baseline equations for testing Hypothesis 1 and 2 are as follows: (7) (8) where represent year fixed effects and represent firm fixed effects, respectively. 〖Env〗_(i,t) is the proxy for firm i’s information environment in year t, which includes analyst coverage and the fraction of institutional holdings. is the measure of firm i’s stock price informativeness in year t, which is the price nonsynchronicity index . is the coefficient of determination of equation (6), where firm i’s weekly stock returns in year t is regressed on a constant, the value weighted market return, and the return of the industry portfolio. The industry classification is based on the second level code from China Securities Regulatory Commission. We calculate the price nonsynchronicity by two different ways: first we use contemporaneous market return and industry return as independent variables, and second, we add one-week lagged market return and…

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