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Industry and Time Specific Deviations from Fundamental Values in a Random Coefficient Model


Leonardo Becchetti


University of Rome II - Faculty of Economics

Roberto Rocci


University of Rome II - Faculty of Economics

Giovanni Trovato


University of Rome II - Faculty of Economics
April 2004

CEIS Working Paper No. 52

Abstract:     
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 of Pages in PDF File: 25

Keywords: Fundamental/Price Relationship, Finite Mixture Models, EM algorithm, Panel Data

JEL Classification: C140, C230, G120

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Date posted: April 7, 2004  

Suggested Citation

Becchetti, Leonardo, Rocci, Roberto and Trovato, Giovanni, Industry and Time Specific Deviations from Fundamental Values in a Random Coefficient Model (April 2004). CEIS Working Paper No. 52. Available at SSRN: http://ssrn.com/abstract=528002 or http://dx.doi.org/10.2139/ssrn.528002

Contact Information

Leonardo Becchetti
University of Rome II - Faculty of Economics ( email )
Via Columbia, 2
I-00133 Rome
Italy
Roberto Rocci
University of Rome II - Faculty of Economics ( email )
Via Columbia n.2
Rome, Rome 00133
Italy
Giovanni Trovato (Contact Author)
University of Rome II - Faculty of Economics ( email )
Via Columbia n.2
Rome, rome 00100
Italy
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