Eckwert, Bernhard; Drees, Burkhard; Vardy, Felix - EcoMod Network - 2011
In a Bayesian setting, investments can be risky either because they are opaque, i.e., their payoff-relevant signals are noisy, or because they are fundamentally risky, i.e., the variance of the prior is high. When interest rates are low (high), investors favor opaque (transparent) projects that...