Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
This article argues that market prices in contemporary financial markets are driven by the value of information multiplied by a factor of the information’s velocity. These factors combined have the potential to explain several observed market phenomenon, including market volatility during economic crisis or recession, market bubbles, flash crashes, and short-run volatility combined with overreactions and over-corrections. The theory considers both micro and macroeconomic information, and questions the assumption that market prices always reflect intrinsic value alone. While microeconomic information is helpful in determining a security’s intrinsic value relative to other securities, macroeconomic information impacts the aggregate market. The result of our contemporary high-velocity information environment suggests our financial markets are becoming informationally hyperefficient and quasi-rational. This hyperefficiency has the potential to create short-run volatility on a scale not previously experienced.
- © 2012 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600