TY - JOUR
T1 - Information quality and stock returns revisited
AU - Brevik, F.
AU - d' Addona, S.
PY - 2010
Y1 - 2010
N2 - This paper investigates the relation between information on the state of the economy and equity risk premium. We use a setup where investors have Epstein-Zin preferences and the economy randomly switches between booms and recessions. We are able to establish 2 key results: First, investors with high elasticity of intertemporal substitution (EIS) will require lower excess returns for holding stocks if they are provided with better information on the state of the economy. Second, we find that this also holds for investors with moderate EIS if they are sufficiently risk averse. © 2010 Michael G. Foster School of Business, University of Washington.
AB - This paper investigates the relation between information on the state of the economy and equity risk premium. We use a setup where investors have Epstein-Zin preferences and the economy randomly switches between booms and recessions. We are able to establish 2 key results: First, investors with high elasticity of intertemporal substitution (EIS) will require lower excess returns for holding stocks if they are provided with better information on the state of the economy. Second, we find that this also holds for investors with moderate EIS if they are sufficiently risk averse. © 2010 Michael G. Foster School of Business, University of Washington.
UR - https://www.scopus.com/pages/publications/79952898316
UR - https://www.scopus.com/inward/citedby.url?scp=79952898316&partnerID=8YFLogxK
U2 - 10.1017/S0022109010000578
DO - 10.1017/S0022109010000578
M3 - Article
SN - 0022-1090
VL - 45
SP - 1419
EP - 1446
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 6
ER -