Cover of: The informativeness of prices | Roland Benabou

The informativeness of prices

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  • 52 Pages
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Dept. of Economics, Massachusetts Institute of Technology , Cambridge, Mass
StatementRoland Benabou, Robert Gertner
SeriesWorking paper / Dept. of Economics -- no. 555, Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 555.
ContributionsGertner, Robert H., Massachusetts Institute of Technology. Dept. of Economics
The Physical Object
Pagination52 p. :
ID Numbers
Open LibraryOL24635867M
OCLC/WorldCa22302833

Since stock price informativeness is shown to be associated with more efficient capital allocation (Chen et al.,Durnev et al., ), with more information about future earnings, and with better management decisions (Durnev et al., ); an understanding of the factors that affect stock price informativeness is important.

Given China's stage of economic development and its Cited by:   Stock price informativeness is an important aspect of micro market structure. Stock price informativeness is viewed as the result of aggregating information amongst different types of investors (Huang and Ni, ).

Even though there is a considerable volume of papers addressing stock price informativeness, there remains many surprising results and open questions for further Cited by: amount of information contained in the price for an investor who only learns about an asset’s payoff from the price.

We formally define absolute price informativeness as the precision of the unbiased signalabouttheinnovationtothefundamentalrevealedbyassetprices. Relativepriceinformativeness measures the informational content of prices relative to the total amount of uncertainty about the.

Volatility and Informativeness Eduardo Dávila, Cecilia Parlatore. NBER Working Paper No. Issued in January NBER Program(s):Asset Pricing, Economic Fluctuations and Growth We explore the equilibrium relation between price volatility and price informativeness in financial markets, with the ultimate goal of characterizing the type of inferences that can be drawn about price Cited by: 2.

(). Capitalization of R&D and the Informativeness of Stock Prices. European Accounting Review: Vol. 16, No. 4, pp. Cited by:   The final price informativeness proxy we consider is the probability of informed trading (PIN) measure of Easley et al.

This measure is based on a market microstructure model in which trades can be executed by noise or informed traders. PIN has been chosen as a proxy of private information in stock prices by many studies.

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If the price manipulation decreases the price informativeness, we observe a larger price discount following negative cumulative stock returns. However, if the price manipulation depresses the stock price temporarily, underwriters take that into account and discount the share price less following the negative cumulative stock returns.

We examine whether short interest improves the informativeness of stock prices with respect to future earnings. We find that short selling strengthens the relation between current returns and future earnings, especially in settings where short sellers are likely to possess an information advantage, such as when a firm’s information environment is weak or when analysts are highly optimistic.

As for price informativeness, we use the probability of informed trading (PIN) to measure the informed trader’s information production effort. Easley, Kiefer, and O’Hara (, a, b) develop the PIN measure in a structural market microstructure model, to which our.

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searches the inventories of overbooksellers worldwide, accessing millions of books in just one simple step. Financial Statement Comparability and the Informativeness of Stock Prices About Future Earnings Accounting comparability and the value relevance of earnings and book value, Journal of Corporate Accounting & Finance, /jcaf, 31, 4, (), ().

Wiley Online Library. Price nonsynchronicity captures firm-specific stock return variations that are unexplained by market movements and has been shown to be a good indicator of stock price informativeness (see Section I.C for a detailed discussion).

For investors, the price informativeness helps to reduce the firm cost of equity by reducing the risk of uninformed investors (Fernandes and Ferreira, ).

Inflation reduces the informativeness of current prices, causing customers to make costly mistakes about which relationships to enter. In addition, the reduced informativeness of prices makes demand less price-elastic, thereby increasing markups.

Both effects can be. Qi Chen, Itay Goldstein, Wei Jiang, Price Informativeness and Investment Sensitivity to Stock Price, The Review of Financial Studies, Vol Issue 3, MayPages –, Market value of equity plus book value of assets minus book value of equity, scaled by book value of assets.

Download Citation | Capitalization of R&D and the Informativeness of Stock Prices | This paper presents both a new approach to studying the consequences of accounting choice and. ZeroDays is also a cruder measure for informativeness, as it does not consider the magnitude of stock price movements, but only the extent to which stock prices move at all.

This binary definition neglects companies that trade actively on the market, but with little firm-specific information. In the book, theoretical and practical statements and positions related to the practice of smoothing the corporate income and its varied consequences, especially on the informativeness and stock prices, is systematized.

Both the positive and the negative effects of income smoothing are analyzed. The problem is mainly related to the. Investor Protection and Price Informativeness About Future Earnings: International Evidence. May ; Review of Accounting Studies 17(2) DOI: /sz. Authors: In-Mu Haw. Liquid stock prices are more informative about future firm earnings growth than illiquid stock prices.

Because information-related illiquidity can arise when uncertainty is high, we focus our analysis on evidence that noninformational liquidity affects price informativeness. level price informativeness and the investor sentiment index developed by Baker and Wugler r ().

We consider four measures of price informativeness.

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The first three arei) the cross: (- sectional average of 𝐸𝐸𝐸𝐸𝐸𝐸. 𝑖𝑖,𝑡𝑡 𝑇𝑇; (ii) the absolute value of th averageis ; and, (iii) the cross-sectional. asymmetry [33] or informativeness of trades [21]. Motivated by a stylized model of the order book, we relate the intraday changes in the price impact coe cient to variations in market depth and show that price impact is inversely proportional to the depth of the order book.

This. informativeness of orders or traders: e.g., Anand, Chakravarti and Martell () (hereafter ACM) used the average change in the mid-point of bid and o⁄er prices from the time of submission of an order to a point of time 30 minutes later to proxy for the information.

Laurent Fresard, Cash Savings and Stock Price Informativeness, Review of Finance, Vol Issue 4, OctoberPages –, Market value of equity (item 24 multiplied by item 25) plus book value of assets minus book value of equity minus deferred taxes (item 6.

Market value of equity divided by book value of equity at year-end. R e t: The stock return over the 12 months beginning nine months prior to the end of fiscal year. S i z e: Market value of equity at the end of the fiscal year. s: The length of an earnings string. As Ohlson () explores informativeness of fiscal yearend earnings as a proxy for next period’s earnings, two alternative models are suggested, where next fiscal yearend equity price and price.

This study examines whether and how policy changes that aim to improve market efficiency, specifically the mandatory adoption of International Financial Reporting Standards (IFRS), influence the relation between product market competition and stock price informativeness.

Using a sample of European firms, we find a negative association between product market competition and stock price. Informativeness of prices. Cambridge, MA: National Bureau of Economic Research, [] (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Roland Benabou; Robert H Gertner; National Bureau of Economic Research.

Compare Book Prices and Save Money on Books & Textbooks: Compare book prices to find the best price for new, used and rental books and college textbooks at the major Online Stores. Our Book Price Comparison is free, objective and easy to use. tive informativeness of earnings, w e use the value relev ance of earnings (Relev ance) and earnings informativeness (EI).

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Variable definitions are pro vided in Section and App endix B. The book value of equity is an accounting measure based on the historic cost principle and reflects past issuances of equity, augmented by any profits or .The author obtains similar results when he reestimates the regression by including changes in net working capital and short-term debt, which are viewed as substitutes for cash.

Results remain essentially the same when the author reestimates the regression equation with two alternative measures of price informativeness (illiquidity and gamma).The Informativeness of the Limit Order Book in a Periodic Call Market.

Abstract. Using the intraday data on the Taiwan Stock Exchange (TWSE), we address the issue of the informativeness of the limit order book in the periodic call market. We find that the pre-call information variables, i.e., the market order and the radius of the limit.