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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...
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We explore the effect of interest rates on risk taking and find that the direction of the effect depends on the type of risk involved. 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...
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We explore the effect of interest rates on risk taking and find that it depends on the type of risk involved. In a Bayesian setting, investments can be risky either because payoff-relevant signals are noisy or because the dispersion of the prior is high. While both types of risk contribute...
Persistent link: https://www.econbiz.de/10011048540
We explore the intuitive idea that more information leads to greater dispersion of posterior beliefs about the expected state of the world. First, we show that two dispersion orders that have been widely used as informativeness criteria do not satisfy the desirable property of ordinality of...
Persistent link: https://www.econbiz.de/10011076686