Global stock markets have rallied significantly during the first half of the year, recovering from huge losses since last year’s financial crisis. A significant example of this is the Singapore stock market, which surged 38.7 percent on its market capitalisation to $545 billion at the end of June, making it a ten-month high since August 2008.
As the Nanyang Business School-Business Times Roundtable discussion series continues, research scholars and senior professors from Nanyang Technological University’s business school discuss the issue regarding impacts and information risks on stock market players and practitioners, such as stock remisiers, stock analysts, dealers and portfolio managers.
As the discussion starts, Narendra Aggarwal, director of Nanyang Business School, asks the participants, “how does the information flow on listed companies usually take place and get shared among the market players – both individuals and institutional investors – and the practitioners?”
Lilian Ng, Finance Professor at the University of Wisconsin, says that the primary information on stock market generally depends on the country’s information environment as well as to their firms. It also depends on how the firms disseminate information to the public, through time–to-time announcements. She also emphasizes that markets get lots of information through various analyst from its firms.
Thomas Noe, Management Studies Professor in Saïd Business School at Oxford University says, “I would like to add that information also flows the other way as you get information from the markets going to the firms”. Stock market affects the decision of the firm. “My research has shown that this leads to higher efficiency. If you have a liquid stock market and highly appropriate prices, firms operate better and choose better policies.” Thus, the flow of information is bidirectional between firms and markets, rather than just the firm itself.
Hwang Chuan Yang, Research and PhD Programme director and Finance Professor, says the firms acquire the information through the stock price, making the resources allocate efficiently and run better. With this, it is very important to form an environment so that accurate information are being given to the market and be reflected on the stock price as quickly as possible.
Qian Xiaolin, PhD researcher from Information Risk explains that the information is divided into two: public and private information. Public information is the information available for all the participants in the stock market, which can be through public disclosure of the firm or informed traders as their trading actions produce information available for everyone. Private information, on the other hand, is information coming from insider or from skilled investors, such as portfolio managers and financial analysts, who had already analysed the public information with the use of their skills and interpretations.