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Market Development, Information Diffusion and the Global Anomaly Puzzle

Cai, Charlie X.; Keasey, Kevin; Li, Peng; Zhang, Qi

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Authors

Charlie X. Cai

Kevin Keasey

Peng Li

Qi Zhang



Abstract

Previous literature finds anomalies are at least as prevalent in developed markets as in emerging markets; namely, the global anomaly puzzle. We show that while market development and information diffusion are linearly related, information diffusion has a nonlinear impact on anomalies. This is consistent with theoretical developments concerning the process of information diffusion. In extremely low efficiency regimes, without newswatchers sowing the seeds of price discovery and ensuring the long-run convergence of price to fundamentals, initial mispricing and subsequent correction will not occur. The concentration of emerging countries in low efficiency regimes provides an explanation to the puzzle.

Citation

Cai, C. X., Keasey, K., Li, P., & Zhang, Q. (2023). Market Development, Information Diffusion and the Global Anomaly Puzzle. Journal of Financial and Quantitative Analysis, 58(1), 104-147. https://doi.org/10.1017/s0022109022000643

Journal Article Type Article
Acceptance Date Feb 4, 2021
Online Publication Date Jul 11, 2022
Publication Date 2023-02
Deposit Date Feb 15, 2021
Publicly Available Date Feb 22, 2021
Journal Journal of Financial and Quantitative Analysis
Print ISSN 0022-1090
Electronic ISSN 1756-6916
Publisher Cambridge University Press
Peer Reviewed Peer Reviewed
Volume 58
Issue 1
Pages 104-147
DOI https://doi.org/10.1017/s0022109022000643
Public URL https://durham-repository.worktribe.com/output/1252513

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