Unexpected News or Financial Flows

Gordon Pepper
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Gordon Pepper: Department of Banking and Finance, City University Business School

Chapter 2 in Money, Credit and Asset Prices, 1994, pp 17-28 from Palgrave Macmillan

Abstract: Abstract According to the efficient-market hypothesis, all known information relevant to share prices is assimilated quickly and is reflected in market prices. It appears to follow that all changes in market prices are the result of unexpected new items of information. This book argues, in contrast, that flows of funds are another important explanation. But this begs a question. Cannot flows of funds be discounted in the same way as other information? The chapter describes how competition between speculators anticipating changes in flows of funds can create gyrations in markets rather than smooth adjustments. It also describes how market movements caused by flows of funds can determine sentiment; instead of causality running from expectations to market movements, it runs in the reverse direction.

Keywords: Good News; Time Diagram; Financial Flow; Important Explanation; Market Movement (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37593-2_3

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DOI: 10.1057/9780230375932_3

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