Information stages in efficient markets

Farid AitSahlia and Joon-Hui Yoon

Journal of Banking & Finance, 2016, vol. 69, issue C, 84-94

Abstract: Market efficiency, in its strong form, asserts that asset prices fully reflect all available information. The classical event study methodology attempts to make explicit this link by assuming rigid and universal pre-event, event, and post-event periods. As an alternative, our framework captures the progressive diffusion of information around events as well as the overlapping impacts of separate events. We also illustrate that our approach captures mean-reversion of expected returns and increased volatility around announcement dates. These features reflect latent regime switches and are associated with semi-strong market efficiency.

Keywords: Market efficiency; Change-points; Markov chain Monte Carlo; Bayes factors (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:69:y:2016:i:c:p:84-94

DOI: 10.1016/j.jbankfin.2016.04.003

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