The Informativeness of Stock Prices, Misallocation and Aggregate Productivity

Venky Venkateswaran, Hugo A. Hopenhayn and Joel David
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Hugo A. Hopenhayn: UCLA

No 455, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: Capital markets function as aggregators of private information and in an environment with imperfectly informed firms, guide investment and production decisions. We study the implications of poorly functioning capital markets for the misallocation of factors of production across heterogeneous firms. Our theoretical framework combines a noisy rational expectations model of asset markets with a standard model of production by heterogeneous firms. We use a model calibrated to cross-country stock market and firm-level data to investigate the extent to which differences in capital market conditions can explain TFP differences across countries.

Date: 2013
New Economics Papers: this item is included in nep-cta, nep-dge and nep-eff
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:455

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