Ambiguity, Information Quality, and Asset Pricing
Top Cited Papers
- 10 January 2008
- journal article
- Published by Wiley in The Journal of Finance
- Vol. 63 (1) , 197-228
- https://doi.org/10.1111/j.1540-6261.2008.01314.x
Abstract
When ambiguity‐averse investors process news of uncertain quality, they act as if they take a worst‐case assessment of quality. As a result, they react more strongly to bad news than to good news. They also dislike assets for which information quality is poor, especially when the underlying fundamentals are volatile. These effects induce ambiguity premia that depend on idiosyncratic risk in fundamentals as well as skewness in returns. Moreover, shocks to information quality can have persistent negative effects on prices even if fundamentals do not change.Keywords
This publication has 23 references indexed in Scilit:
- Market Reactions to Tangible and Intangible InformationThe Journal of Finance, 2006
- Equilibrium stock return dynamics under alternative rules of learning about hidden statesJournal of Economic Dynamics and Control, 2004
- IID: independently and indistinguishably distributedJournal of Economic Theory, 2003
- Recursive multiple-priorsJournal of Economic Theory, 2003
- An exploration of the effects of pessimism and doubt on asset returnsJournal of Economic Dynamics and Control, 2002
- Competing Theories of Financial AnomaliesThe Review of Financial Studies, 2002
- Stock price volatility and equity premiumJournal of Monetary Economics, 2001
- Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic RiskThe Journal of Finance, 2001
- Asymmetric Volatility and Risk in Equity MarketsThe Review of Financial Studies, 2000
- Investor Psychology and Security Market Under‐ and OverreactionsThe Journal of Finance, 1998