The Role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization

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Amiri Meisam; Hoseini Seyed Mojtaba

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Paper Information

Journal: JOURNAL OF FINANCIAL MANAGEMENT STRATEGY Year:2019 | Volume:7 | Issue:26 Page(s): 25-60

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Title

The Role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization

Author(s)

Amiri Meisam | Hoseini Seyed Mojtaba | Issue Writer Certificate

Keywords

Portfolio OptimizationQ1

Stock Price SynchronicityQ1

Stock Price InformativenessQ1

Financial and Nonfinancial DataQ1

Data Envelopment AnalysisQ1

Fuzzy Delphi MethodQ1

Abstract

Stock Price Synchronicity measures the degree to which market change can explain stock price movement, and Stock Price Informativeness measures the degree to which information can explain this movement. The effect of information release on price is higher in optimal information environments than other environments and, as a result, informativeness is higher. In this situation, the effect of market and industry changes on stock price will be reduced, consequently reducing Stock Price Synchronicity. Theoretically, Stock Price Synchronicity and Stock Price Informativeness are two sides of the same coin, but studies have shown different results. These two criteria have different behaviors in various environments based on the company’ s fundamental variables. As a result, the goal of this study was examining the role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization. Thus, by collecting 300, 000 pieces of data from 130 sample companies during 10 years, we computed Stock Price Synchronicity and Stock Price Informativeness. Then, by analyzing these data using Data Envelopment Analysis (DEA) and fuzzy Delphi techniques, we made several portfolios and compared them. The result demonstrated that these two criteria have different behaviors in different situations and if Stock Price Synchronicity and Stock Price Informativeness are considered in portfolio selection, then portfolios will have a better return. Considering Stock Price Synchronicity improves the return of portfolio by 86% and Stock Price Informativeness improves it up to 75%, while this value will be reduced to 47% on average without considering these crtieria.

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APA: Copy

Amiri, Meisam, & Hoseini, Seyed Mojtaba. (2019). The Role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, 7(26 ), 25-60. SID. https://sid.ir/paper/387439/en

Vancouver: Copy

Amiri Meisam, Hoseini Seyed Mojtaba. The Role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY[Internet]. 2019;7(26 ):25-60. Available from: https://sid.ir/paper/387439/en

IEEE: Copy

Meisam Amiri, and Seyed Mojtaba Hoseini, “The Role of Stock Price Synchronicity and Stock Price Informativeness on Portfolio Optimization,” JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, vol. 7, no. 26 , pp. 25–60, 2019, [Online]. Available: https://sid.ir/paper/387439/en

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