ASYMMETRIC INFORMATION AND THE EXCESS VOLATILITY OF STOCK PRICES

Abstract

Evidence suggests the volatility of stock prices cannot be accounted for by information about future dividends. We argue that some of the volatility of stock prices in excess of fundamentals results from fluctuations in the amount of public information over time. Our model assumes that dividends and consumption are constant in the aggregate but that there are good lirms and bad firms whose identity may be unknown to the public, as in Akerlof’s “lemons” problem. In that case, the collective valuation of the constant dividend stream depends on the degree of informational asymmetry. Economic Inquiry, April 1994, XxX11: 228-235. (Reprinted with permission of the Economic Inquiry.)

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 31 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.