The Effect of Asymmetric Information and Transaction Costs on Asset Pricing: Theory and Test
33 Pages Posted: 21 Apr 2003
Abstract
This paper presents a capital asset pricing model in the presence of asymmetric information and transaction costs. The model is a generalized version of Merton's (1987) model and Black's (1974) model. Empirical tests show a negative relation between the expected rate of return and the shadow costs of incomplete information. The results in this paper have the potential to explain the home bias equity in a domestic and an international context.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why is There a Home Bias? An Analysis of Foreign Portfolio Equity Ownership in Japan
By Jun-koo Kang and René M. Stulz
-
By Gur Huberman
-
Home Bias and the High Turnover
By Linda L. Tesar and Ingrid M. Werner
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
Corporate Governance and the Home Bias
By Lee Pinkowitz, Rohan Williamson, ...
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
The Portfolio Flows of International Investors, I
By Kenneth Froot, Paul G.j. O'connell, ...
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai