IDEAS home Printed from https://ideas.repec.org/a/oup/qjecon/v108y1993i4p1135-1145..html
   My bibliography  Save this article

How Learning in Financial Markets Generates Excess Volatility and Predictability in Stock Prices

Author

Listed:
  • Allan G. Timmermann

Abstract

Two of the most discussed anomalies in the financial literature are the predictability of excess returns and the excess volatility of stock prices. Learning effects on stock price dynamics are an intuitive candidate to explain these empirical findings: estimation uncertainty may increase volatility of stock prices and an estimate of the dividend growth rate that is, say, lower than the "true" value tends to increase the dividend yield and capital gain. Simulations of learning effects in a present value model confirm that learning may help to explain excess volatility and predictability of stock returns.

Suggested Citation

  • Allan G. Timmermann, 1993. "How Learning in Financial Markets Generates Excess Volatility and Predictability in Stock Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 1135-1145.
  • Handle: RePEc:oup:qjecon:v:108:y:1993:i:4:p:1135-1145.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/2118462
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:qjecon:v:108:y:1993:i:4:p:1135-1145.. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.