Peering into the future: A study of the relationship between listed industry peer populations and stock price informativeness

Abstract: This thesis explores the relationship between US firms' stock price informativeness and the number of US public companies belonging to their same primary industry. The study is conducted on an unbalanced panel of 94,714 firm-year observations over the period from 1976 to 2016. Using an extended FERC methodology with fixed effects, I find that the association between price informativeness and industry listing counts is insignificantly negative in my main specification. Furthermore, the inverse relationship becomes statistically significant in recent years and across a couple of robustness checks. Taken at face value, the non-positive results suggest that the informativeness of most US stock prices may not have suffered from their having fewer listed industry peers in the last two-and-a-half decades. Additionally, the persistently negative coefficients hint that investors may be employing intra-industry information improperly, especially in more recent times for firms with high market-to-book ratios.