Asymmetric Information and the Excess Volatility of Stock Prices
AbstractEvidence suggests the volatility of stock prices cannot be accounted for by information about future dividends. The authors argue that some of the volatility of stock prices in excess of fundamentals results from fluctuations in the amount of public information over time. Their model assumes that dividends and consumption are constant in the aggregate but that there are good firms and bad firms whose identity may be unknown to the public, as in George Akerlof's (1970) 'lemons' problem. In that case, the collective valuation of the constant dividend stream depends on the degree of informational asymmetry. Copyright 1994 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 32 (1994)
Issue (Month): 2 (April)
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- Eden, B. & Jovanovic, B., 1992. "Asymmetric Information and the Excess Volatility of Stock Prices," Working Papers 92-18, University of Iowa, Department of Economics.
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- Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001.
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- Crouzille, Celine & Lepetit, Laetitia & Tarazi, Amine, 2004. "Bank stock volatility, news and asymmetric information in banking: an empirical investigation," Journal of Multinational Financial Management, Elsevier, vol. 14(4-5), pages 443-461.
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