Price volatilities make stock investments risky, leaving investors in critical position when uncertain decision is made. To improve investor evaluation confidence on exchange markets, while not using time series methodology, we specify equity price change as a stochastic process assumed to possess Markov dependency with respective state transition probabilities matrices following the identified...

Using a new hand-collected data set, this study examines the stock price manipulation in the Taiwan Stock Exchange (TSE). We examine the characteristics of the manipulated stocks, and their impacts on market quality. The results show that manipulated stocks tend to be small. The stock prices rise throughout the manipulation period, followed by a price reversal. The average cumulative abnormal r...

We study the impact of foreign institutional investor (FII) flows on stock returns in India. We exploit stock-level daily trading data for FII purchases and FII sales during 2006-2011 to separate stocks into those experiencing abnormally high and low FII flow innovations. We find that stocks with high innovations are associated with a coincident price increase that is permanent, whereas stocks ...

We consider a market in which …rms can partially observe each consumer’s search behavior in the market. In our main model, a …rm knows whether a consumer is visiting it for the …rst time or whether she is returning after a previous visit. Firms have an incentive to o¤er a lower price on a …rst visit than a return visit, so that new consumers are o¤ered a “buy-now”discount. The ability to o¤er s...

We present strong evidence that high differences of opinion stocks earn lower returns around earnings announcements. The evidence is similar across six different proxies for differences of opinion (earnings volatility, return volatility, dispersion of analysts’ earnings forecasts, number of analysts, firm age, and share turnover). The three-day hedge returns (returns on low minus high differenc...

One of the tenets of equilibrium asset pricing models is that expected return of an asset is positively related to its risk (price variability of the asset). In other words, it is expected that assets with higher expected returns are also the ones with higher risk, or assets with lower risk are the ones with lower expected returns. The logic behind this idea is actually is simple and intuitive:...

Conventional theory suggests that fiat money will have value in capitalpoor economies. We demonstrate that fiat money may also have value in capital-rich economies, if the price of capital is excessively volatile. Excess asset-price volatility is generated by news ; information that has no social value, but is privately useful in forming forecasts over the short-run return to capital. One advan...

Inflation depends generically on current and expected monetary and fiscal policies. There are three ways to carry $1 today into the future: money, bonds, and real assets. That dollar’s purchasing power varies inversely with the price level. The real return on money depends on the flow of transactions services it supports and the expected inflation rate; the analogous return on bonds is the nomi...

This paper provides a theoretical framework for pricing assets in a multiperiod economy with heterogeneous beliefs. The stock price dynamics follow a binomial lattice structure. Agents are allowed to differ in their beliefs of the probability and asset return in each state of nature. By constructing a consensus belief, we examine the impact of heterogeneous beliefs on market equilibrium. Static...

The relation between the volatility of stocks and bonds and their price valuations is strongly time-varying, both in magnitude and direction, defying traditional asset pricing models and conventional wisdom. We construct and estimate a model in which investors’ learning about regular and unusual fundamental states leads to a non-monotonic V −shaped relation between volatilities and prices. Stru...