Abstract
This paper shows that in asset pricing the information environment gives rise to a systematic risk factor when the informativeness of future news events varies with their content (i.e., bad news and good news are not equally informative). The paper further shows that in such cases (cross) serial correlation in stock returns arises. The results provide new insights on on the relation between disclosure and cost of capital and on empirically documented patterns in stock returns like momentum and post earnings announcement drift.
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