The Informativeness of Stock Prices, Misallocation and Aggregate Productivity
Hugo A. Hopenhayn and
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Hugo A. Hopenhayn: UCLA
No 455, 2013 Meeting Papers from Society for Economic Dynamics
Capital markets function as aggregators of private information and in an environment with imperfectly informed firms, guide investment and production decisions. We study the implications of poorly functioning capital markets for the misallocation of factors of production across heterogeneous firms. Our theoretical framework combines a noisy rational expectations model of asset markets with a standard model of production by heterogeneous firms. We use a model calibrated to cross-country stock market and firm-level data to investigate the extent to which differences in capital market conditions can explain TFP differences across countries.
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:455
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