The effect of asymmetric information and transaction costs on asset pricing: theory and tests

Bellalah, Makram; Aboura, Sofiane

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

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Type

Communication / Conférence

Date

2003

Conference title

12th Annual Meeting of EFMA

Conference date

2003-06

Conference city

Helsinki

Conference country

Finland

Metadata

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Author(s)

Bellalah, Makram

Aboura, Sofiane
Dauphine Recherches en Management [DRM]

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 / Keywords

Asset pricing; Asymmetric information; Home bias

JEL

G11 - Portfolio Choice; Investment Decisions
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
G14 - Information and Market Efficiency; Event Studies; Insider Trading