Arbeitspapier
Have financial markets become more informative?
The finance industry has grown. Financial markets have become more liquid. Information technology has improved. But have prices become more informative? Using stock and bond prices to forecast earnings, we find that the information content of market prices has not increased since 1960. The magnitude of earnings surprises, however, has increased. A baseline model predicts that as the efficiency of information production increases, prices become more disperse and covary more strongly with future earnings. The forecastable component of earnings improves capital allocation and serves as a direct measure of welfare. We find that this measure has remained stable. A model with endogenous information acquisition predicts that an increase in fundamental uncertainty also increases informativeness as the incentive to produce information grows. We find that uncertainty has indeed increased outside of the S&P 500, but price informativeness has not.
- Sprache
-
Englisch
- Erschienen in
-
Series: Staff Report ; No. 578
- Klassifikation
-
Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Information and Market Efficiency; Event Studies; Insider Trading
- Thema
-
financial markets
price informativeness
earnings
investment
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Bai, Jennie
Philippon, Thomas
Savov, Alexi
- Ereignis
-
Veröffentlichung
- (wer)
-
Federal Reserve Bank of New York
- (wo)
-
New York, NY
- (wann)
-
2012
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Bai, Jennie
- Philippon, Thomas
- Savov, Alexi
- Federal Reserve Bank of New York
Entstanden
- 2012
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