Smart Money, Noise Trading and Stock Price Behaviour
Albert Kyle and
John Campbell ()
Scholarly Articles from Harvard University Department of Economics
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.
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Published in Review of Economic Studies
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Journal Article: 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)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3208217
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