Information Quality and Market Efficiency

Thomas S. Y. Ho and Roni Michaely

Journal of Financial and Quantitative Analysis, 1988, vol. 23, issue 1, 53-70

Abstract: The purpose of this paper is to analyze the optimal individual behavior in acquiring information and to determine the amount of information incorporated in a stock at equilibrium, in the presence of a cost schedule in acquiring information. Our paper shows that at equilibrium the cost to acquire information that is not already incorporated in the price depends only on the representative investor's risk preferences. It follows that the marginal information costs are the same across all stocks at equilibrium even though the stock's information costs schedules may differ. This suggests that the prices of small stocks may not incorporate all publicly available information. This paper also provides empirical evidence that newspapers' publication of publicly available information can affect the stock prices.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
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:cup:jfinqa:v:23:y:1988:i:01:p:53-70_01

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().