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...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

This paper investigates how a profit-maximizing asset originator can coordinate the information acquisition of investors with different expertise by means of asset bundling. Bundling is beneficial to the originator when it discourages investors from analyzing idiosyncratic risks and focuses...

While international portfolios are still heavily biased towards home assets, the home bias has exhibited a clear downward trend in the last few decades. Interestingly, the underlying rise in foreign investment has been primarily directed to just a handful of OECD countries, and has not given...

We investigate market selection and bet pricing in a simple Arrow security economy which we show is equivalent to the repeated prediction market models studied in the literature. We derive the condition for long run survival of more than one agent (the crowd) and quantify the information content...