In an incomplete market with heterogeneous prior beliefs, we show public information can have a substantial impact on the ex ante cost of capital, trading volume, and investor welfare. The Pareto efficient public information system is the system enjoying the maximum ex ante cost of capital and...

We propose a multidimensional liquidity measure constructed from 6 out of 17 individual low-frequency liquidity proxies. The multidimensional liquidity factor yields significant positive premiums and offers distinguished explanatory power on the cross-sectional return variations in China’s...