Based on the notion that private information necessarily accompanies trade and leads to return variation, this paper …

Asset price processes are completely described by information processes and investors' preferences. In this paper we … stochastic volatility of asset prices and to give theoretical arguments for empirically well documented facts. We show that … stylized facts that look at first hand like financial market anomalies may be explained by an information process with …

Puzzling deviations from the predictions of rational finance theory have been extensively documented empirically. In … this paper, we offer an explanation for one of these anomalies, the “excess volatility puzzle”, i.e. the observation that … inefficient) excess component. The endogenously induced excess volatility is found to be substantial, largely stable at longer …