Intraindustry Information Transfer: An Analysis of Research Methods and Additional Evidence.

This study analyzes estimators used in information transfer research. It concludes that tests which use the announcing firm's abnormal return to proxy for the information signal generally overstate the significance of information transfer due to cross-covariation of regression disturbances. However, some related approaches may actually understate information transfer. Another approach, based on direct estimation of the signal, yields an estimator that is less sensitive to assumptions about regression disturbances. This study also tests hypotheses concerning the influence of industry structure on information transfer, since the econometric analysis suggests that prior results concerning this issue should be interpreted with caution. The evidence indicates that transfers are most pronounced in homogeneous and concentrated industries. Copyright 1995 by Kluwer Academic Publishers