AN INVESTOR EXPECTATIONS STOCK PRICE PREDICTIVE MODEL USING CLOSED‐END FUND PREMIUMS

AN INVESTOR EXPECTATIONS STOCK PRICE PREDICTIVE MODEL USING CLOSED‐END FUND PREMIUMS A THEORY OF INVESTOR EXPECTATIONS The Theory of Investor Expectations is totally consistent with Cootner's hypothesis that stock prices behave as a random walk within reflecting barriers." Cootner theorizes that market participants fall into one of two categories; first, a large group of non-professionals whose marginal research costs are so high that they "choose among stocks on the basis of information about future prospects (that is as) likely to be wrong as not.i'" and since new information flows to them in a non-systematic manner, their market activities work towards creating random price fluctuations around some mean value. Second, there exists a small group of market professionals (whose financial * Assistant Professor Economics and Finance, The Bernard M. Baruch College of The City University of New York. 1. A collection of various R.W. tests is found in Cootner [3]. 2. For example, see, Granger [7]. 3. See, Fama [6]. 4. "For those willing to go beyond existing methodological constraints, there would seem to be a number of exciting possibilities for research on equity models . . . (for example, the) formation of investor expectations." Keenan [l0], p. 262. 5. Cootner [2]. 6. Ibid., p. 233 in Cootner [3]. The http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

AN INVESTOR EXPECTATIONS STOCK PRICE PREDICTIVE MODEL USING CLOSED‐END FUND PREMIUMS

The Journal of Finance, Volume 28 (1) – Mar 1, 1973

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Publisher
Wiley
Copyright
1973 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1973.tb01346.x
Publisher site
See Article on Publisher Site

Abstract

A THEORY OF INVESTOR EXPECTATIONS The Theory of Investor Expectations is totally consistent with Cootner's hypothesis that stock prices behave as a random walk within reflecting barriers." Cootner theorizes that market participants fall into one of two categories; first, a large group of non-professionals whose marginal research costs are so high that they "choose among stocks on the basis of information about future prospects (that is as) likely to be wrong as not.i'" and since new information flows to them in a non-systematic manner, their market activities work towards creating random price fluctuations around some mean value. Second, there exists a small group of market professionals (whose financial * Assistant Professor Economics and Finance, The Bernard M. Baruch College of The City University of New York. 1. A collection of various R.W. tests is found in Cootner [3]. 2. For example, see, Granger [7]. 3. See, Fama [6]. 4. "For those willing to go beyond existing methodological constraints, there would seem to be a number of exciting possibilities for research on equity models . . . (for example, the) formation of investor expectations." Keenan [l0], p. 262. 5. Cootner [2]. 6. Ibid., p. 233 in Cootner [3]. The

Journal

The Journal of FinanceWiley

Published: Mar 1, 1973

References

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