Asset Pricing and Asymmetric Information

Ripamonti, Alexandre and Silva, Diego and Moreira Neto, Eurico (2018): Asset Pricing and Asymmetric Information. Published in: Asian Journal of Economics, Business and Accounting , Vol. 7, No. 2 (14 June 2018): pp. 1-9.

Abstract

This study applies Johansen-Fisher panel cointegration to a sample of the most liquid shares on the Brazilian stock market for 20 years. It finds that stock prices are determined by the asymmetric information of a lagged period, and the dilution of information corrects stock prices in the current period. This shows that rational expectations theory can offer a new price measure in the rational valuation formula, and its main assumptions are met. Uninformed traders can benefit from this paper´s findings by monitoring asymmetric information.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asset pricing; rational valuation formula; asymmetric Information; Corwin-Schultz Bid-Ask spread estimator; Johansen-Fisher Panel Cointegration
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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