Smart Money, Noise Trading and Stock Price Behaviour
John Campbell () and
Albert S. Kyle
Review of Economic Studies, 1993, vol. 60, issue 1, 1-34
This paper estimates an equilibrium model of stock price behaviour in which changes in exponentially de-trended dividends and prices are normally distributed and exogenous "noise traders" interact with "smart-money" investors who have constant absolute risk aversion. The model can explain the volatility and predictability of U.S. stock returns in the period 1871–1986 using either a low discount rate (4% or below) and a large constant risk discount on the stock price, or a higher discount rate (5% or above) and noise trading correlated with fundamentals. The data are not well able to distinguish between these explanations.
References: Add references at CitEc
Citations: View citations in EconPapers (128) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Smart Money, Noise Trading and Stock Price Behaviour (1993)
Working Paper: SMART MONEY, NOISE TRADING AND STOCK PRICE BEHAVIOR (1988)
Working Paper: Smart Money, Noise Trading and Stock Price Behavior (1988)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:60:y:1993:i:1:p:1-34.
Access Statistics for this article
Review of Economic Studies is currently edited by Andrea Prat, Bruno Biais, Kjetil Storesletten and Enrique Sentana
More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().