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Does Firm-specific Information in Stock Prices Guide Capital Allocation?

Durnev, Artyom - 2001

We show that firms in industries in which firm-specific stock price variation is larger use more external financing and allocate capital with greater precision in the sense that their marginal q ratios are closer to one. According to the Efficient Markets Hypothesis, greater firm-specific stock...

Persistent link: https://www.econbiz.de/10012470636

Herd on the Street : Informational Inefficiencies in a Market with Short-Term Speculation

Froot, Kenneth A. - 1990

Standard models of informed speculation suggest that traders try to learn information that others do not have. This result implicitly relies on the assumption that speculators have long horizons, i.e, can hold the asset forever. By contrast, we show that if speculators have short horizons, they...

Persistent link: https://www.econbiz.de/10012475787

Private Information and Sunspots in Sequential Asset Markets

Benhabib, Jess - 2014

We study a model where some agents have private information about risky asset returns and trade to obtain capital gains, while others acquire the risky asset and hold it to maturity, forming expectations of returns based on market prices. We show that under such a structure, in addition to fully...

Persistent link: https://www.econbiz.de/10012458620

How Constraining Are Limits to Arbitrage? Evidence from a Recent Financial Innovation

Ljungqvist, Alexander - 2014

Limits to arbitrage play a central role in behavioral finance. They are thought to interfere with arbitrage processes … innovation that allows limits to arbitrage to be sidestepped, and overvaluation thereby to be corrected, even in settings … innovation that allows the arbitrageurs to sidestep limits to arbitrage involves credibly revealing their information to the …

Persistent link: https://www.econbiz.de/10012458828

Trading Costs and Informational Efficiency

Dávila, Eduardo - 2019

We study the effect of trading costs on information aggregation and acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex-ante identical: price informativeness is independent of the level of trading costs....

Persistent link: https://www.econbiz.de/10012479613

Identifying Price Informativeness

Dávila, Eduardo - 2018

We show that outcomes (parameter estimates and R-squareds) of regressions of prices on fundamentals allow us to recover exact measures of the ability of asset prices to aggregate dispersed information. Formally, we show how to recover absolute and relative price informativeness in dynamic...

Persistent link: https://www.econbiz.de/10012480862

Private Information and its Effect on Market Equilibrium : New Evidence from Long-Term Care Insurance

Finkelstein, Amy - 2003

This paper examines the standard test for asymmetric information in insurance markets: that its presence will result in a positive correlation between insurance coverage and risk occurrence. We show empirically that while there is no evidence of this positive correlation in the long-term care...

Persistent link: https://www.econbiz.de/10012468740

Efficiency and Information Transmission in Bilateral Trading

Shimer, Robert - 2015

We study pairwise trading mechanisms in the presence of private information and limited commitment, whereby either trader can walk away from a proposed trade when he learns the trading price. We show that when one trader's information is relevant for the other trader's value of the asset,...

Persistent link: https://www.econbiz.de/10012457173

Know Your Customer : Informed Trading by Banks

Haselmann, Rainer; Leuz, Christian; Schreiber, Sebastian - National Bureau of Economic Research - 2022

This study analyzes information production and trading behavior of banks with lending relationships. We combine trade-by-trade supervisory data and credit-registry data to examine banks' proprietary trading in borrower stocks around a large number of corporate events. We find that relationship...

Persistent link: https://www.econbiz.de/10013388877

Estimation Risk, Market Efficiency, and the Predictability of Returns

Lewellen, Jonathan - 2000

In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular,...

Persistent link: https://www.econbiz.de/10012471062

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