Data Abundance and Asset Price Informativeness

63 Pages Posted: 21 Feb 2014 Last revised: 30 Aug 2017

See all articles by Jerome Dugast

Jerome Dugast

Université Paris-Dauphine, PSL Research University; Université Paris Dauphine - Department of Finance

Thierry Foucault

HEC Paris - Finance Department

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2017

Abstract

Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns.

Keywords: Asset Price Informativeness, Big Data, FinTech, Information Processing, Markets for Information, Contrarian and momentum trading.

JEL Classification: G10, G12, G14, G30,D61, M41

Suggested Citation

Dugast, Jerome and Foucault, Thierry, Data Abundance and Asset Price Informativeness (August 30, 2017). HEC Paris Research Paper No. FIN-2014-1036, Paris December 2014 Finance Meeting EUROFIDAI - AFFI Paper, Available at SSRN: https://ssrn.com/abstract=2398904 or http://dx.doi.org/10.2139/ssrn.2398904

Jerome Dugast

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

Université Paris Dauphine - Department of Finance ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France
+33 1 44 05 40 41 (Phone)

HOME PAGE: http://https://sites.google.com/view/jeromedugast/home

Thierry Foucault (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
(33)139679569 (Phone)
(33)139677085 (Fax)

HOME PAGE: http://thierryfoucault.com/

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