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 InfoPaper provided by University of Iowa, Department of Economics in its series Working Papers with number 92-18.
Length: 19 pages
Date of creation: 1992
Date of revision:
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Postal: University of Iowa, Department of Economics, Henry B. Tippie College of Business, Iowa City, Iowa 52242
Phone: (319) 335-0829
Fax: (319) 335-1956
Web page: http://tippie.uiowa.edu/economics/
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information ; prices ; stock market;
Other versions of this item:
- Eden, Benjamin & Jovanovic, Boyan, 1994. "Asymmetric Information and the Excess Volatility of Stock Prices," Economic Inquiry, Western Economic Association International, vol. 32(2), pages 228-35, April.
- Eden, B. & Jovanovic, B., 1992. "Asymmetric Information and the Excess Volatility to Stock Prices," Working Papers 92-47, C.V. Starr Center for Applied Economics, New York University.
- Eden, Benjamin & Jovanovic, Boyan, 1988. "Asymmetric Information And The Excess Volatility Of Stock Prices," Working Papers 88-31, C.V. Starr Center for Applied Economics, New York University.
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