Information, Impact, Ignorance, Illegality, Investing, and Inequality

Abstract

We note a simple mechanism that may at least partially resolve several outstanding economic puzzles, including why the cyclically adjusted price to earnings ratio of the S&P 500 index has been oddly high for the past two decades, why gains to capital have outpaced gains to wages, and the persistence of the equity premium.

arXiv comment2 pages; v2: comment added in the TeX source file with the SHA checksum of a longer version of this article sent to the Securities and Exchange Commission on September 10, 2015; v3: added the checksum of an article detailing the impact arb described in Section II