This paper uses a competitive equilibrium model to study how institutional investors influence the volatility and the informativeness of asset prices. Institutional investors are assumed to be "rational" informed traders, while individual investors are supposed to be "naive" informed traders,...

Stock market prices are procyclical, while investment good prices are countercyclical. A real business cycle model calibrated to these observations implies that 75% of the cyclical variation in aggregate output is due to an investment-specific technology shock, while the rest is due to an...

Building on recent developments in behavioral asset pricing, we develop a model in which an increase in the dispersion of investor beliefs under short-selling constraints predicts a "bubble," or a rise in a stock's price above its fundamental value. Our model predicts that managers respond to...

The finance industry has grown. Financial markets have become more liquid. Information technology has improved. But have prices become more informative? Using stock and bond prices to forecast earnings, we find that the information content of market prices has not increased since 1960. The...

The expected return to equity--typically measured as a historical average--is a key variable in the decision making of investors. A recent literature based on analysts forecasts and practitioner surveys finds estimates of expected returns that are sometimes much lower than historical averages....

As traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of re-selling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums...

This paper compares the predictions for the market value of firms from the Gordon growth model with those from a dynamic general equilibrium model of production. The predictions for movements in the market value of firms in response to a decline in the required return or an increase in the...

The relationship between corporate reputation and investment results is the subject of ongoing debate. Some argue that high-quality firms ultimately provide superior stock price performance; others counter that stock prices already reflect these firms' prospects for growth and profitability. This...