Abstract
We propose a simple model of equilibrium asset pricing in which there are differences in the amounts of information available for developing inferences about the returns parameters of alternative securities. In contrast with earlier work, we show that parameter uncertainty, or estimation risk, can have an effect upon market equilibrium. Under reasonable conditions, securities for which there is relatively little information are shown to have relatively higher systematic risk when that risk is properly measured, ceteris paribus. The initially very limited model is shown to be robust with respect to relaxation of a number of its principal assumptions. We provide theoretical support for the empirical examination of at least three proxies for relative information: period of listing, number of security returns observations available, and divergence of analyst opinion.
Keywords
Differential (mechanical device)BusinessEconomicsMathematical economicsComputer sciencePhysicsThermodynamics
Affiliated Institutions
Related Publications
Intertemporal Asset Pricing Without Consumption Data
This paper proposes a new way to generalize the insights of stark asset pricing theory to a multiperiod setting. The paper uses a loglinear approximation to the budget constrain...
An Intertemporal Capital Asset Pricing Model
An intertemporal model for the capital market is deduced from the portfolio selection behavior by an arbitrary number of investors who aot so to maximize the expected utility o...
Day of the Week Effects and Asset Returns
The number of empirical studies using daily stock returns is rapidly increasing.' Researchers generally assume that the distribution of stock returns is identical for all days o...
Equilibrium in a Capital Asset Market
This paper investigates the properties of a for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize pref...
SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATION*
Sections II and III of this paper set forth the simple logic which leads directly to the determination of explicit equilibrium prices of risk assets traded in competitive market...
Publication Info
- Year
- 1985
- Type
- article
- Volume
- 20
- Issue
- 4
- Pages
- 407-407
- Citations
- 951
- Access
- Closed
External Links
Social Impact
Altmetric
PlumX Metrics
Social media, news, blog, policy document mentions
Citation Metrics
951
OpenAlex
49
Influential
648
CrossRef
Cite This
Christopher B. Barry,
Stephen J. Brown
(1985).
Differential Information and Security Market Equilibrium.
Journal of Financial and Quantitative Analysis
, 20
(4)
, 407-407.
https://doi.org/10.2307/2330758
Identifiers
- DOI
- 10.2307/2330758