This research will examine the behavior of prices in economies in which individuals have asymmetric information. Price formation will be carefully modeled in static and overlapping generation economies where agents may acquire information concerning the dividend process of risky assets. Preliminary investigations indicate that asymmetries in information can lead prices to be more volatile than the underlying dividend stream, and can result in returns which are larger than those predicted by more standard symmetric information models. Thus, asymmetric information offers an explanation for the excess volatility and equity premium puzzles discussed in the literature. The research will take a close look at how the behavior of prices depends on the particular information structure as well as a number of other factors including: the specification of trading rules, risk aversion, costs of obtaining information, and the size of the economy.