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The Structure of Asset Prices and Socially Useless/Useful Information
Author(s) -
OHLSON JAMES A.
Publication year - 1984
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1984.tb04915.x
Subject(s) - economics , context (archaeology) , asset (computer security) , value (mathematics) , capital asset pricing model , estimator , econometrics , value of information , microeconomics , financial economics , mathematical economics , computer science , mathematics , statistics , paleontology , computer security , biology , machine learning
This paper relates the value of additional information to asset prices in a pure exchange setting. The price structure of interest revolves around a “pricing‐hypothesis”: the prices in an economy with less information are unbiased estimators of the prices that would obtain in a more informative economy. Two basic results are developed. First, if the incremental information is useless then the pricing‐hypothesis applies. Second, if the pricing hypothesis is assumed valid, then the information is valuable in a weak sense. The results are also considered in the context of empirical research. The case is made for viewing statistical tests of association between prices and signals as tests of the social value of information.