Structural Breaks, Incomplete Information, and Stock Prices

Allan Timmermann

Journal of Business & Economic Statistics, 2001, vol. 19, issue 3, 299-314

Abstract: This article presents empirical evidence on the existence of structural breaks in the fundamentals process underlying U.S. stock prices. I develop an asset-pricing model that represents breaks in the context of a Markov switching process with an expanding set of nonrecurring states. Different hypotheses on how investors form expectations about future dividends after a break are proposed and analyzed. A model in which investors do not have full information about the parameters of the dividend process but gradually update their beliefs as new information arrives is shown to induce skewness, kurtosis, volatility clustering, and serial correlation in stock returns after a break.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (60)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Structural Breaks, Incomplete Information and Stock Prices (2001)
Working Paper: Structural Breaks, Incomplete Information and Stock Prices (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:19:y:2001:i:3:p:299-314

Ordering information: This journal article can be ordered from
http://www.amstat.org/publications/index.html

Access Statistics for this article

Journal of Business & Economic Statistics is currently edited by Jonathan H. Wright and Keisuke Hirano

More articles in Journal of Business & Economic Statistics from American Statistical Association
Bibliographic data for series maintained by Christopher F. Baum ().