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On the Profitability of Rumors

Author

Listed:
  • Luca Gelsomini

    (Venice School of Management - Department of Management, Ca’ Foscari University of Venice)

Abstract

In this paper, we propose an asset pricing framework wherein the asset price is sensitive to rumors. Unlike extant research, our paper demonstrates that it may be impossible for an amateur analyst to generate trading profits from spreading rumors. This outcome crucially depends on exogenous factors such as the probability that a given rumor may be noise rather than truthful, and the shape of the asset value distribution.

Suggested Citation

  • Luca Gelsomini, 2024. "On the Profitability of Rumors," Working Papers 2024: 06, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2024:06
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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