Building on prior literature, this chapter discusses the role of information risk in the pricing of stocks. This framework forms the foundation for the main question about how investors price IPO firms. The first section presents two possible definitions of information risk as based on the equilibrium model by Easley and O’Hara (2004). In the second section, different ways of how empirical researchers have operationalized the notion of information risk are presented. The chapter closes with a discussion of the empirical work on information risk and the consequences of information risk for asset pricing and market efficiency.


Abnormal Return Information Asymmetry Earning Management Information Quality Information Risk 
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© Gabler | GWV Fachverlage GmbH, Wiesbaden 2008

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