Banerjee, Snehal; Breon-Drish, Bradyn M.; Smith, Kevin - 2021
making an investment decision. While learning from prices always improves investment efficiency, we identify a novel channel … by which it can reduce welfare. Namely, investment decisions change the stock’s exposure to underlying shocks and …, consequently, investors’ ability to hedge risk. We show that this is a robust feature of general investment decisions, and outline …