1 Does Stock Return Synchronicity Really Matter In Terms of Stock Price Informativeness?

Durnev et al. (2003) find that firms with lower synchronicity exhibit higher association between current returns and future earnings, indicating more informative stock prices. We revisit this issue and show that without controlling for size, high synchronicity firms actually exhibit higher price informativeness. However, we also find that large (small) firms have higher (lower) price informativeness and that, after properly accounting for the strong correlation between synchronicity and size, synchronicity reveals nothing about stock price informativeness. Finally, we show that the results of Durnev et al. (2003) are driven by unrepresentative samples, unreliable estimates for the stock price informativeness measures, and a problematic aggregation method for the synchronicity measure. Overall, this paper provides little support for the informational interpretation of synchronicity, and it demonstrates that it is inappropriate to use synchronicity as a measure for stock price informativeness. JEL classification