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On the Timeliness of Price Discovery
Wendy Anne Beekes, Lancaster University
Philip Brown, Universities of New South Wales and Western Australia
ABSTRACT. Price discovery is the process whereby value-relevant, private information becomes impounded or reflected in a stock's publicly-observable market price. The timeliness of price discovery refers to how quickly that process takes effect. There is no reason to believe that all private information is discovered equally quickly or that price discovery is equally speedy for all firms. To compare timeliness across firms we focus upon the announcement of the company’s annual results. We use various approaches to explore measures of timeliness. We review a number of studies that have considered various aspects of timeliness in different countries and extend and contrast their findings. We also examine the relationship between the timeliness of price discovery and analogous measures based upon firms’ formal disclosures to the share market and upon analysts’ consensus earnings forecasts. Finally, we consider the influence of corporate governance on the timeliness of price discovery.
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