An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Ting Luo
University of Wisconsin Madison

Abstract: This paper explores whether industry financial reporting quality can explain firm-specific return synchronicity by inducing excess stock covariance relative to stock fundamentals. The results show that industry financial reporting quality is negatively related to the extent to which industry returns are accounted for by excess stock comovement within that industry. Firm-specific return synchronicity is negatively associated with industry financial reporting quality. Also, industry-level momentum strategy is more profitable in poor reporting industries than in good reporting industries. These findings suggest that return synchronicity does not necessarily reflect the informativeness of industry performance in stock prices.

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