Economic Events, Information Structure, and the Return-Generating Process

Abstract

The parameters of the return process of a firm are determined by two elements—the natural event structure, i.e., the process by which nature affects the value of the firm, and the information structure, i.e., the process by which information about these events is collected and disseminated to investors. Simple measures of three dimensions of the information structure—the frequency and accuracy of, and the bias in information releases, are derived from the moments of the return distribution.