An additional risk premium (RP) to the capital asset pricing model (CAPM). This disinformation premium is part of the expected returns (on the capital assets/ stock/ firm) and depends on the relationship between the shadow cost of the firm in question and the overall shadow cost in the market. CAPM, as a financial model, is based on a set of standard assumptions, particularly as to complete information, transaction costs, taxes, borrowing, and unrestricted short selling.

A special form of CAPM (general CAPM, GCAPM), and other extensions proposed an incomplete information capital market equilibrium with heterogeneous expectations and short sale restrictions. The shadow costs consist of two components: 1) the product of pure information cost due to imperfect knowledge and heterogeneous expectations and 2) the additional cost arising from the short-selling constraint.

Measurement of the shadow costs is not an easy or straightforward task, especially for the whole market. The model is premised on a market with homogeneous conditional expectations where investors only receive information on a set of assets, and don’t trade but such assets for which information is available to them. Under this incomplete information setting, the resulting equilibrium asset pricing model produces an extra mean return, over and above the market risk premium (MRP), which reflects, and corresponds to the disinformation cost of such assets for all investors.

Empirical evidence indicates that investors tend to seek lower returns for assets with more available information. The lack of information poses as a source of risk. The disinformation risk factor corresponds to a specific type of premium, the disinformation risk premium.