The Effect of Publicly Available Information

Abstract

We now examine how the market inference procedure is affected by the large amount of publicly available information. In the previous Chapter the process of signal extraction from dividends has been studied in a very simplified framework assuming that no information was available to the market except dividends and earnings. This description of the interaction between firms and shareholders is clearly unrealistic since in fact almost every firm is subject to close market’s scrutiny and a large amount of information is produced by financial analysts to help investors to select the best stocks.