THE INFORMATION RISK DRIVERS.A LONG-TERM ANALYSIS TO SUPPORT A RISK PREMIA MODELLING

Information risk is an endogenous element of the market dynamics that can be independent from contingent levels of market efficiency. Being structural, it may require remuneration by a specific risk premia or by returns from specific portfolio strategies. Drivers of information risk are detected applying an original model to the case of the European Markets as traced by the Eurostoxx Index and an 18 industry index over 15 years of data. Results show that information risk may effectively affect financial markets’ equilibrium both at systematic and industry-specific level, while determinants of the information risk are found to be used by long-term investors, stock pickers and market timers. Evidence from the paper supports financial communication policies for investor relation activities along with some change for Regulators.