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Research Article Open access CC BY 4.0

Asset Pricing and Asymmetric Information

Alexandre Ripamonti, Diego Richard da Silva, Eurico Batista Moreira Neto

Asian Journal of Economics, Business and Accounting · pp. 1–9 · Published 12 Jun 2018

10.9734/AJEBA/2018/42075

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.

Asset pricing rational valuation formula asymmetric Information Corwin-Schultz Bid-Ask spread estimator Johansen-Fisher Panel Cointegration

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