Posted by Alex Edmans, London Business School, on Thursday, April 7, 2016
Editor's Note:
Alex Edmans is Professor of Finance at London Business School. This post is based on an article authored by Professor Edmans and Sudarshan Jayaraman, Associate Professor of Accounting at the University of Rochester.
In our paper, The Source of Information in Prices and Investment-Price Sensitivity, which was recently made publicly available on SSRN, we show that real decisions depend not only on the total amount of information in prices, but the source of this information—a manager learns from prices when they contain information not possessed by him.