We propose a model of delegated asset management in which individual investors are more informed about the domestic market than the foreign market and face uncertainty about quality of portfolio managers. The model shows that asymmetric information of individual investors results in home bias...

Importers rarely observe the price of every good in every market because of information frictions. In this paper, we seek to explain how the presence of such frictions shape the flow of goods between countries. To this end, we introduce rationally inattentive importers in a multi-country...

This paper explains financial contagion between two independent stock markets by fluctuations in international investors' attention allocation. I model the process of attention allocation that underlies portfolio investment in international markets using rationally inattentive agents. Investors...

The challenge of evaluating asymmetric information theories relies on assessing the pieces of information investors decide to process. This paper overcomes such challenge exploring a unique dataset containing the "search/click-through" behavior of internet search engine users. We analyze the...

This paper explains the home equity bias and its puzzling evolution in a model where investors face an information constraint and have an initial local informational advantage. After financial liberalization, local investors have a magnified informational advantage since information processed...

This paper explains financial contagion between two independent stock markets by fluctuations in international investors' attention allocation. I model the process of attention allocation that underlies portfolio investment in international markets using rationally inattentive agents. Investors...

This paper shows that imperfect financial integration and informational asymmetries are not competing theories but rather complementary ideas to a single explanation of the home bias puzzle. We develop a rational expectations model of asset prices with investors that face informational...

This paper explores the joint determination of home bias and attention allocation. We overcome the typical challenge associated with evaluating attention allocation theories by using a new internet search query dataset to measure how much information investors decide to process. Employing an...

In this paper, we decompose attention allocation in two components -- the familiar and the surprising -- with opposite implications for US purchases of foreign stocks. On one hand, familiarity-induced attention leads to an increase in US holdings of foreign equities. On the other hand,...