An Analysis of Speed of Stock Price Adjustment to Market Wide Information

This study aims to identify firm level characteristics that determine the information assimilation pace of individual stocks in Dhaka Stock Exchange. The research sample consists of 32 stocks with yearly data for 5 years, a total of 160 firm-year observations. Bivariate and multivariate panel data analysis were used to study the effects of firm specific characteristics upon the speed of adjustment proxy DELAY. The analysis was conducted based on the hypothesis that some stocks tend to adjust faster to market wide information than others. It was found that parameters such as price to earnings ratio, annual turnover, and closing price had a significant influence on information assimilation. Firms with higher price to earnings ratio, higher turnover and higher closing price of stock adjusted the market news faster. Other variables such as financial leverage, price to book value ratio, earning per share, and number of shares traded had no significant influence on the speed of adjustment.