Ambiguous information in asset markets leads to excess volatility in prices.
The article explores how uncertain information affects asset prices in financial markets. When investors are unsure about the quality of information, it can lead to less trading and more volatile prices. This can happen because traders may choose not to trade when information is unclear, causing prices to be more sensitive to small changes. The study shows that when there is a lot of uncertainty, trading volume decreases and the risk of not being able to sell assets easily increases. This uncertainty can also cause asset prices to be more unpredictable and fluctuate more than usual.