We develop a return variance decomposition model to separate the role of different types of information and noise in stock price movements. We disentangle four components: market-wide information, private firm-specific information revealed through trading, firm-specific information revealed...

Purpose This paper examines whether there are differences in the nature of the price discovery process across established versus emerging stock markets using a twenty-country sample. Design/methodology/approach The authors analyse security returns for traces of predictability or non-randomness...

Do all types of information benefit the efficiency of prices in the sense that they drive them closer to fundamentals compared to the situation where information does not exist? Looking at the competitive noisy rational expectations framework, the clear answer of the literature is: yes. It...

We study the effect of country-specific noise on stock price comovement. Using a sample of dual-listed stocks, we show that the effect persists over time for some largest A-shares traded in China, but diminishes quickly for their H-shares traded in Hong Kong. We then examine whether the noise...

This paper investigates whether short-term momentum and long-term reversal may emerge from the wealth reallocation process taking place in speculative markets. We assume that there are two classes of investors who trade long-lived assets by holding constantly rebalanced portfolios based on their...

This paper investigates the speed of price discovery when information becomes publicly available but requires costly processing to become common knowledge. We exploit the unique institutional setting of hacks on decentralized finance (DeFi) protocols. Public blockchain data provides the precise...

We model 73.62 million London Stock Exchange (LSE) trades and show that the LSE's high rate of failure to open at the opening auction only relates to low volume stocks. Low volume stock traders avoid trading until the open; this seems connected to their evading the informed trading-dominated...

A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we...

We study the effects of quantitative equity investing, an increasingly popular investment style, on financial market quality. Within a noisy REE model of strategic speculation with two informed market participants, we define discretionary investing as fully strategic trading and quantitative...

In this paper, we introduce a Transactionally Efficient Market Model, which evolves from the standard efficient market model, encompassing both transaction costs and bid-ask prices. Hence, we delve into how arbitrage makes its way within this complex setting. The main outgrowth of the analysis...