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Data Abundance and Asset Price Informativeness

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  • Foucault, Thierry
  • Dugast, Jérôme

Abstract

Investors can acquire either raw or processed information about the payoff of risky assets. Information processing filters out the noise in raw information but it takes time. Hence, investors buying processed information trade with a lag relative to investors buying raw information. As the cost of raw information declines, more investors trade on it, which reduces the value of processed information, unless raw information is very unreliable. Thus, a decline in the cost of raw information can reduce the demand for processed information and, for this reason, the informativeness of asset prices in the long run.

Suggested Citation

  • Foucault, Thierry & Dugast, Jérôme, 2016. "Data Abundance and Asset Price Informativeness," CEPR Discussion Papers 11190, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11190
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    More about this item

    Keywords

    Price informativeness; Information processing; Markets for information; Contrarian and momentum trading;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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