Asymmetric Information and the Excess Volatility of Stock Prices.
Evidence 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.
Year of publication: |
1994
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Authors: | Eden, Benjamin ; Jovanovic, Boyan |
Published in: |
Economic Inquiry. - Western Economic Association International - WEAI. - Vol. 32.1994, 2, p. 228-35
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Publisher: |
Western Economic Association International - WEAI |
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