We introduce heterogeneity in the pricing of aggregate risks of various persistence into a dynamic corporate finance model with financing frictions. We show that if long-term (persistent) shocks have a higher market price than short-term (temporary) shocks, firms shorten the horizon of corporate...

We jointly model the information choice and portfolio allocation problem of institutional investors who are concerned about their performance relative to a benchmark. Benchmarking increases an investor's effective risk-aversion, which reduces his willingness to speculate and, consequently, his...

We consider the joint dynamics of information acquisition and portfolio choice by a CRRA investor who can purchase information about a risky asset. The ability to purchase information creates persistence in returns. Indeed, information improves portfolio performance, which in turn increases the...

The international CAPM (ICAPM) extends the classical CAPM by adding exchange rate risks as priced factors. In the literature, both conditional and unconditional tests confirm the significance of exchange rate risk. However, typical conditional tests of the ICAPM include few instruments with...

We study the joint portfolio and information choice problem of institutional investors who are concerned about their performance relative to a benchmark. Benchmarking influences information choices through two distinct economic mechanisms. First, benchmarking reduces the number of shares in...

Information is a valuable good that requires scarce inputs, such as human talent, to produce. Competition among investors for these inputs creates an equilibrium channel that has not yet been modeled explicitly. This paper studies the dynamic implications of this channel for information choice,...