Publication

The effect of asymetric information and transaction costs on asset pricing : theory and tests

Sofiane ABOURA

This paper presents a capital asset pricing model in the presence of asymmetric information and transaction costs. The model is a generalized version of Merton’s (1987) model and Black’s (1974) model. Empirical tests show a negative relation between the expected rate of return and the shadow costs of incomplete information. The results in this paper have the potential to explain the home bias equity in a domestic and an international context.

Publication type: 
Scientific Article
Date de parution: 
01/2006
Support: 
International Journal of Business