Asset Pricing and Asymmetric Information
Alexandre Ripamonti *
University of Sao Paulo, Brazil
Diego Richard da Silva
University of Mogi das Cruzes, Brazil
Eurico Batista Moreira Neto
University of Mogi das Cruzes, Brazil
*Author to whom correspondence should be addressed.
Abstract
This study applies Johansen-Fisher panel cointegration to a sample of the most liquid shares on the Brazilian stock market for 20 years. It finds that stock prices are determined by the asymmetric information of a lagged period, and the dilution of information corrects stock prices in the current period. This shows that rational expectations theory can offer a new price measure in the rational valuation formula, and its main assumptions are met. Uninformed traders can benefit from this paper´s findings by monitoring asymmetric information.
Keywords: Asset pricing, rational valuation formula, asymmetric Information, Corwin-Schultz Bid-Ask spread estimator, Johansen-Fisher Panel Cointegration