The Informational Role of Prices, vol 1

Sanford Grossman

in MIT Press Books from The MIT Press

Abstract: Over the past decade, Sanford Grossman's contributions to the economics of information have significantly altered the way economists think about rational expectations. Here his articles are collected in one place, providing a uniform framework for understanding how prices convey information in securities markets. Grossman elaborates a new model of economic equilibrium that casts a dual role for prices both as constraints that affect the immediate costs or benefits of acts and as conveyers of information about the probable future costs and benefits of those acts. He points to the Wall Street panic of October 1987 as an example of the informational role of prices where volatility actually represented sophisticated trading strategies by relatively uninformed individuals.

Keywords: information economics; prices; securities markets (search for similar items in EconPapers)
JEL-codes: B31 D8 E3 (search for similar items in EconPapers)
Date: 1989
Edition: 1
ISBN: 0-262-57214-1
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Citations: View citations in EconPapers (73)

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