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False News, Informational Efficiency, and Price Reversals

Abstract : Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns.
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Preprints, Working Papers, ...
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https://hal-hec.archives-ouvertes.fr/hal-02058260
Contributor : Antoine Haldemann <>
Submitted on : Tuesday, March 5, 2019 - 9:01:18 PM
Last modification on : Wednesday, March 6, 2019 - 1:30:17 AM

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Jjrrme Dugast, Thierry Foucault. False News, Informational Efficiency, and Price Reversals. 2014. ⟨hal-02058260⟩

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