Information Inertia

We show that aversion to risk and ambiguity leads to information inertia when investors process public news about assets. Optimal portfolios do not always depend on news that is worse than expected; hence, the equilibrium stock price does not reflect this bad news. This informational inefficiency is more severe when there is more risk and ambiguity but disappears when investors are risk neutral or the news is about idiosyncratic risk. Information inertia leads to news momentum (e.g. after earnings announcements) and is consistent with low trading activity of households. An ambiguity premium helps explain the macro and earnings announcement premium

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Year of publication:	2020
Authors:	Illeditsch, Philipp K.
Other Persons:	Ganguli, Jayant V. (contributor) ; Condie, Scott (contributor)
Publisher:	[2020]: [S.l.] : SSRN
Subject:	Theorie \| Theory \| Informationsverhalten \| Information behaviour \| Informationsökonomik \| Economics of information \| Information \| Unvollkommene Information \| Incomplete information

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Extent:	1 Online-Ressource (65 p)
Type of publication:	Book / Working Paper
Language:	English
Notes:	In: Journal of Finance, Forthcoming Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 2, 2020 erstellt
Other identifiers:	10.2139/ssrn.2084683 [DOI]
Classification:	D80 - Information and Uncertainty. General ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G10 - General Financial Markets. General ; G11 - Portfolio Choice ; G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012857251