Information,interest rates,and the volatility of asset prices |
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| Authors: | Laurence S. Copeland Richard C. Stapleton |
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| Affiliation: | (1) Department of Accounting and Finance, The School of Management, University of Stirling, FK9 4LA Stirling, Scotland;(2) Department of Accounting and Finance, The Management School, Lancaster University, LA1 4YX Lancaster, United Kingdom |
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| Abstract: | The volatility of an asset price is modelled as a function of the volatility of an information signal, real interest rates and inflation expectations. Volatility depends on the duration of cash flows, and the degree to which cash flows are indexed to real rates and inflation. The model is applied to determine asset betas, the volatility of the futures prices of assets and the volatility of equity prices. |
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| Keywords: | asset price volatility information signals interest rates expected inflation |
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