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INFORMATION FUNCTION OF THE FINANCIAL MARKET AND THE PRICING OF MARKET ASSETS
Abstract
The article explains that the information function of the financial market is the key for pricing of a financial asset. Information acts as an argument of nonlinear function of returns, prices and risk level. At a time when the information becomes a hefty price, the information value of the financial market becomes comparable to its interests effect. It gives the basis to include information factor as a variable in the model of capital asset pricing and the financial market model. In turn, secondary market prices are useful information for decision-making. The study highlighted the importance of psychological and behavioral factors in the formation of market dynamics. Dominance of psychological factors in the behavior of market participants creates trends similar to cyclic dynamics.
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