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Fulton, Chad - In: Theoretical economics : TE ; an open access journal in … 17 (2022) 1, pp. 153-184

This paper studies static rational inattention problems with multiple actions and multiple shocks. We solve for the optimal signals chosen by agents and provide tools to interpret information processing. By relaxing restrictive assumptions previously used to gain tractability, we allow agents...

Persistent link: https://www.econbiz.de/10012806924

Smart City Investments under Dynamic Information Acquisition

Keppo, Jussi - 2020

quality sensitivity of demand before her investment decision. The government chooses thehighest price such that demand …

Persistent link: https://www.econbiz.de/10012852676

Searching for information

Han, Jungsuk; Sangiorgi, Francesco - 2015

This paper provides a microfounded information acquisition technology based on a simple framework with information search. When searchable information is limited, an agent encounters increasingly more redundant information in his search for new information. Redundancy slows down the learning...

Persistent link: https://www.econbiz.de/10010529422

Rational Information Choice in Financial Market Equilibrium

Muendler, Marc-Andreas - 2021

Adding a stage of signal acquisition to the expected utility model shows that Bayesian updating results in a well defined law of demand for financial information when asset return distributions are conjugate priors to signals such as in the gamma-Poisson case. Signals have a positive marginal...

Persistent link: https://www.econbiz.de/10013318614

Anxiety and Pro-cyclical Risk Taking with Bayesian Agents

Eisenbach, Thomas M. - 2019

We provide a model that can explain empirically relevant variations in confidence and risk taking by combining horizon-dependent risk aversion (“anxiety”) and selective memory in a Bayesian intrapersonal game. In the time series, overconfidence is more prevalent when actual risk levels are...

Persistent link: https://www.econbiz.de/10012904438

Biased Learning under Ambiguous Information

Chen, Jaden Yang - 2021

This paper proposes a model of how biased individuals update beliefs in the presence of informational ambiguity. Individuals are ambiguous about the actual signal-generating process and interpret signals according to the model that can best support their biases. This paper provides a complete...

Persistent link: https://www.econbiz.de/10013234442

Ambiguous Information, Portfolio Inertia, and Excess Volatility

Illeditsch, Philipp K. - 2011

I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices when investors receive information that is difficult to link to fundamentals. I show that the desire of investors to hedge ambiguity leads to portfolio inertia and excess...

Persistent link: https://www.econbiz.de/10013133587

Ambiguous Information, Risk Aversion, and Asset Pricing

Illeditsch, Philipp K. - 2011

I study the effects of aversion to risk and ambiguity (uncertainty in the sense of Knight (1921)) on the value of the market portfolio when investors receive public information that they find difficult to link to fundamentals and hence treat as ambiguous. I show that small changes in public...

Persistent link: https://www.econbiz.de/10013134524

Shadow Probability Theory for Asset Pricing under Ambiguity

Izhakian, Yehuda (Yud) - 2011

Assuming that probabilities (capacities) of events are random, this paper introduces a novel model of decision making … under ambiguity, called Shadow probability theory, a generalization of the Choquet expected utility. In this model … probability space. The level of ambiguity, and the decision maker's attitude toward it, are measured with respect to the directing …

Persistent link: https://www.econbiz.de/10013119880

Are Investors Ever Rational?

Mukherjee, Saptarshi - 2012

Behavioral biases like disposition effect and over-confidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

Persistent link: https://www.econbiz.de/10013099978