The effect of asymmetric information and transaction costs on asset pricing: theory and tests

Makram Bellalah () and Sofiane Aboura
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Makram Bellalah: CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne
Sofiane Aboura: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper presents a capital asset pricing model in the presence of asymmetric information and transaction costs. The model is a generalized version of Merton's (1987) model and Black's (1974) model. Empirical tests show a negative relation between the expected rate of return and the shadow costs of incomplete information. The results in this paper have the potential to explain the home bias equity in a domestic and an international context.

Keywords: Asset pricing; Asymmetric information; Home bias (search for similar items in EconPapers)
Date: 2003-06-25
Note: View the original document on HAL open archive server: https://hal.science/hal-01526167v1
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Published in 12th Annual Meeting of the European Financial Management Association, Jun 2003, Helsinki, Finland. pp.34

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01526167

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