Speaker: Dr Adrain Buss (INSEAD)
Hosted by: University of Liverpool Management School's Accounting and Finance Group
Open to: Management School PhD students and academic staff, with no sign up needed
Date: Wednesday 17 April 2024
Time: 3-4.30pm
Place: Management School - Seminar Room 5
Abstract
We provide novel insights into how investors use information contained in interest rates to learn about economic fundamentals and how this affects informational and allocative efficiency.
Specifically, we develop a noisy rational expectations equilibrium model with an endogenous interest rate that investors use to update their beliefs. The model yields two key findings.
First, the interest rate reveals primarily information about discount rates, allowing investors to extract more information about cashflows from stock prices.
Second, the precision of the interest-rate signal and, hence, stock-price informativeness are positively correlated with the interest rate. We present evidence consistent with this prediction.
Co-authored by Dr Matthijs Breugem, Dr Adrian Buss and Professor Joel Peress.
Speaker
Adrian Buss is a Visiting Professor of Finance at INSEAD, where he teaches "Financial Markets and Valuation" course in the MBA programme and directs the Finance for Executives programme.
Adrian graduated from the University of Mannheim with a degree (M.Sc. equivalent) in Mathematics and Business Information Systems and holds a Ph.D. in Finance from Goethe University Frankfurt.
His current research investigates the effects of financial frictions and financial market regulation on equity prices, prices of risk as well as real exchange rates.
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