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| Author: | Li, B. Yin, X. |
| Title: | Information and capital asset pricing |
| Journal: | European Journal of Finance
2011 : AUG-SEP, VOL. 17:7-8, p. 505-523 |
| Index terms: | asset valuation asymmetric information rational expectations equilibrium analysis investors models |
| Freeterms: | Capital Asset Pricing Model (CAPM) Bayesian inference Sharpe-Lintner CAPM Information-adjusted Market Portfolio (IaMP) Information-adjusted CAPM (IaCAPM) optimal portfolios |
| Language: | eng |
| Abstract: | To accommodate information asymmetry and belief updating, they have developed an empirically testable information-adjusted CAPM stating that the expected excess return of a risky asset/portfolio is only determined by the information-adjusted beta rather than the market beta. The model is used to analyze empirical anomalies of the classic CAPM, including a flatter relation btw. average return and the market beta than the CAPM predicts, a non-zero Jensen's alpha, insignificant explanatory power of the market beta, and size effect. |
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