Timmermann, Allan (1998) Structural breaks, incomplete information and stock prices. Financial Markets Group Discussion Papers (311). Financial Markets Group, The London School of Economics and Political Science, London, UK.
Full text not available from this repository.Abstract
This paper presents empirical evidence on the existence of structural breaks in the fundamentals process underlying US stock prices. We develop an asset pricing model that represents breaks in the context of a Markov switching process with an expanding set of non-recurring states. Different hypotheses on how investors form expectations about future dividends after a break are proposed and analyzed. A model in which investors do not have full information about the parameters of the dividend process but gradually update their beliefs as new information arrives is shown to induce skewness, kurtosis, volatility clustering and serial correlation in stock returns after a break.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://www.fmg.ac.uk/ |
| Additional Information: | © 1998 The Author |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance |
| Date Deposited: | 05 Jul 2023 09:39 |
| Last Modified: | 14 Sep 2024 04:34 |
| URI: | http://eprints.lse.ac.uk/id/eprint/119133 |
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