The effect of asymmetric information and transaction costs on asset pricing: theory and tests
Bellalah, Makram; Aboura, Sofiane (2003), The effect of asymmetric information and transaction costs on asset pricing: theory and tests, 12th Annual Meeting of EFMA, 2003-06, Helsinki, Finland
TypeCommunication / Conférence
Conference title12th Annual Meeting of EFMA
MetadataShow full item record
Abstract (EN)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.
Subjects / KeywordsAsset pricing; Asymmetric information; Home bias
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