Georgia State University and Federal Reserve Bank of Atlanta. We wish to thank the participants in the Atlanta Finance Workshop and the Minnesota Mathematical Economics Workshop for their helpful comments. We acknowledge with thanks the comments of Jim Jordan, David Nachman, Michael Rebello, Stephen Smith, and Jan Werner on an earlier version of this article. We are especially grateful to the editor, René Stulz, and an anonymous referee for comments that have greatly improved the manuscript. The second author wishes to thank the College of Business Research Council, Georgia State University for its support. The views expressed here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank or Federal Reserve System. The usual disclaimer applies.
Information Quality, Performance Measurement, and Security Demand in Rational Expectations Economies
Article first published online: 30 APR 2012
1995 The American Finance Association
The Journal of Finance
Volume 50, Issue 1, pages 341–359, March 1995
How to Cite
NOE, T. H. and RAMAMURTIE, B. S. (1995), Information Quality, Performance Measurement, and Security Demand in Rational Expectations Economies. The Journal of Finance, 50: 341–359. doi: 10.1111/j.1540-6261.1995.tb05177.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
The relationship between asset demand and information quality in rational expectations economies is analyzed. First we derive a number of new summary descriptive statistics that measure four basic characteristics of investment style: asset selection, market timing, aggressiveness, and specialization. Then we relate these statistics to the divergence between a given investor's information structure and the market average information structure. Finally, we demonstrate that informational differentials can be identified, and consistently estimated, using ordinary least squares, from the time-series of observed asset demand.