Working Paper

Information quality, performance measurement, and security demand in rational expectations economies

Abstract: 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 OLS from the time series of observed asset demand.

Keywords: Rational expectations (Economic theory); Information theory;

Status: Published in Journal of Finance, 50, no. 1 (March 1995) : 341-359

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Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 1995

Number: 95-4