Industry and Time Specific Deviations from Fundamental Values in a Random Coefficient Model
Trovato GiovanniBecchetti LeonardoTrovato GiovanniRocci Roberto
CEIS Research Paper
The paper analyzes the relationship between stock prices and fundamentals for a large sample of US stocks in the last ten years using a random coefficient model. Heterogeneity and omitted variable bias are properly taken into account with model coefficients being allowed to vary across time and industries. The random coefficient model allows to track waves of reliance on analysts forecasts and non fundamental stock price components across time.
Number: 52
Keywords: Fundamental/Price Relationship, Finite Mixture Models, EM algorithm, Panel Data
JEL codes: C140, C230, G120
Date: Thursday, April 8, 2004
Revision Date: Thursday, April 8, 2004