Data Abundance and Asset Price Informativeness

Thierry Foucault and Jérôme Dugast

No 11190, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Investors can acquire either raw or processed information about the payoff of risky assets. Information processing filters out the noise in raw information but it takes time. Hence, investors buying processed information trade with a lag relative to investors buying raw information. As the cost of raw information declines, more investors trade on it, which reduces the value of processed information, unless raw information is very unreliable. Thus, a decline in the cost of raw information can reduce the demand for processed information and, for this reason, the informativeness of asset prices in the long run.

Keywords: Price informativeness; Information processing; Markets for information; Contrarian and momentum trading (search for similar items in EconPapers)
Date: 2016-03
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Citations: View citations in EconPapers (5)

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Journal Article: Data abundance and asset price informativeness (2018)
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