NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Have Financial Markets Become More Informative?

Jennie Bai, Thomas Philippon, Alexi Savov

NBER Working Paper No. 19728
Issued in December 2013
NBER Program(s):   AP   CF   EFG   ME

The finance industry has grown, financial markets have become more liquid, information technology has undergone a revolution. But have market prices become more informative? We derive a welfare-based measure of price informativeness: the predicted variation of future cash flows from current market prices. Since 1960, price informativeness has increased at longer horizons (three to five years). The increase is concentrated among firms with greater institutional ownership and share turnover, firms with traded options, and growth firms. Prices have also become a stronger predictor of investment and investment a stronger predictor of cash flows. These results suggest increased revelatory price efficiency.

download in pdf format
   (1646 K)

email paper

This paper was revised on September 9, 2015

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19728

Users who downloaded this paper also downloaded these:
Philippon w18077 Has the U.S. Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation
Frazzini, Kabiller, and Pedersen w19681 Buffett's Alpha
Bianchi and Mendoza w19704 Optimal Time-Consistent Macroprudential Policy
Bloom w19714 Fluctuations in Uncertainty
Bekaert, Harvey, Lundblad, and Siegel w19786 Political Risk Spreads
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us