Data abundance and asset price informativeness

Jérôme Dugast and Thierry Foucault

Journal of Financial Economics, 2018, vol. 130, issue 2, 367-391

Abstract: Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns.

Keywords: Asset price informativeness; Big data; FinTech; Information processing; Markets for information (search for similar items in EconPapers)
JEL-codes: D4 G14 L1 L15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (43)

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Working Paper: Data Abundance and Asset Price Informativeness (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:130:y:2018:i:2:p:367-391

DOI: 10.1016/j.jfineco.2018.07.004

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