This paper analyzes costly information acquisition in asset markets with Knightian uncertainty about the asset fundamentals. In these markets, acquiring information not only reduces the expected variability of the fundamentals for a given distribution (i.e., risk). It also mitigates the...

We develop a measure of how information events impact investors' perceptions of risk that is broadly applicable and simple to implement. We derive this measure from an option-pricing model where investors anticipate an announcement that simultaneously conveys information on the announcer's...

We study whether bond markets efficiently incorporate information about risk. Our results suggest that bond investors underreact to risk information embedded in earnings announcements. A one-standard deviation increase in unexpected risk is associated with a three-day abnormal bond return about...