The effect of asymmetric information and transaction costs on asset pricing: theory and tests

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.

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Year of publication:	2003-06
Authors:	Bellalah, Makram ; Aboura, Sofiane
Institutions:	Université Paris-Dauphine (Paris IX)
Subject:	Asset pricing \| Asymmetric information \| Home bias

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Extent:	application/pdf
Series:	Economics Papers from University Paris Dauphine.
Type of publication:	Book / Working Paper
Classification:	G11 - Portfolio Choice ; G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010707289