A large part of the current debate on US stock price behavior concentrates on the question of whether stock prices are driven by fundamentals or by non-fundamental factors. In this paper we put forward the hypothesis that a present value model with time-varying expected returns provides an...

We propose several multivariate variance ratio statistics. We derive the asymptotic distribution of the statistics and scalar functions thereof under the null hypothesis that returns are unpredictable after a constant mean adjustment (i.e., under the weak form Efficient Market Hypothesis). We do...

Using a simple model of equity valuation, we de fine stock market bubbles and anti-bubbles as periods in which the dynamics of valuation is temporarily explosive. We identify a mechanism for the creation and destruction of bubbles and anti-bubbles that depends on the interaction between...

In this paper, we develop and examine a simple interactive agent‐based model, where the distribution of returns generated from the model takes into account two stylized facts about financial markets： fat tails and volatility clustering. Our results indicate that the risk tolerance of...

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We show that prices are farther away from (closer to) fundamentals compared with average expectations if and only if traders over- (under-) rely on public...

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model with long-term investors. We argue that the fact that prices can score worse or better than consensus opinion in predicting the fundamentals is a product of...

In this paper, we provide evidence that the opening stock price contains noise on an everyday basis among all the NIFTY companies. However, we also find that the impact of noise does get eliminated from prices at the end of the trading day. We show how these seemingly contradictory twin...

This study shows that fitting errors of equity-option-implied volatility surfaces are informative about intermediary frictions. For each stock and day, we quantify the goodness of fit between the observed implied volatilities of all available options and the corresponding estimates from...

Contributing to the debate on the nominal price puzzle, we show that higher stock price level is associated with lower noise trading level which confirms Black's (1986) conjectures that noise traders prefer low-priced stocks to high-priced stocks. The result is robust after controlling for...

This paper proposes a novel measure of noise trading that aims to capture uninformed retail trading. The measure, an indicator of whether the firm placed advertisement(s) in the Wall Street Journal seven calendar days earlier, is motivated by evidence that retail trading spikes seven days after...