Divergent Opinion, Trading Information, and Stock Price Co-movements

Although stock price co-movement has been examined extensively, its causes are not well understood. Using a decomposition method, we extract three information components from the turnover rate: market information, firm-specific information, and investors' opinion divergence. We find that market information strengthens stock price co-movement, whereas firm-specific information weakens it. Moreover, our analysis shows that divergence of investors' opinion increases stock price variations but weakens price co-movement.