This paper studies asset markets in which ambiguity averse investors face Knightian uncertainty about expected payoffs. The same investors, however, might wish to resolve their uncertainty, although not risk, by just purchasing information. In these markets, uninformed and, hence, ambiguity...

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...

We develop a rational expectations model in which an issuer purchases credit ratings sequentially, deciding which to disclose to investors. Opacity about contacts between the issuer and rating agencies induces potential asymmetric information about which ratings the issuer obtained. While the...

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...

Will arbitrage capital flow into markets experiencing shocks, mitigating adverse effects on price efficiency? Not necessarily. In a dynamic model with privately informed capital-constrained arbitrageurs, price efficiency plays a dual role, determining both the profitability of new arbitrage and...

We explore through both an economics and regulatory lens the frictions associated with credit rating agencies in the aftermath of the financial crisis. While ratings and other public signals are an efficient response to scale economies in information production, these also can discourage...