@article{DAVILAPARLATORE2023550,
title = {Volatility and informativeness},
journal = {Journal of Financial Economics},
volume = {147},
number = {3},
pages = {550-572},
year = {2023},
issn = {0304-405X},
doi = {https://doi.org/10.1016/j.jfineco.2022.12.005},
url = {https://www.sciencedirect.com/science/article/pii/S0304405X22002495},
author = {Eduardo Dávila and Cecilia Parlatore},
keywords = {Price informativeness, Price volatility, Learning, Information aggregation, Comovement score},
abstract = {This paper studies the relation between volatility and informativeness in financial markets. We identify two channels (noise-reduction and equilibrium-learning) that determine the volatility-informativeness relation. When informativeness is sufficiently high (low), volatility and informativeness positively (negatively) comove in equilibrium. We identify conditions on primitives that guarantee that volatility and informativeness comove positively or negatively. We introduce the comovement score, a statistic that measures the distance of a given asset to the positive/negative comovement regions. Empirically, comovement scores (i) have trended downwards over the last decades, (ii) are positively related to value and idiosyncratic volatility and negatively to size and institutional ownership.}
}