Information Choice in Financial Markets

Astaiza-Gómez, José Gabriel (2021): Information Choice in Financial Markets.

Abstract

The decision process of an investor who must screen information of varying quality in a stock market with heterogeneous investors leads to new dimensions to consider in the risk-return space. More volatile forecast errors make it more difficult to properly form expectations from forecasts. Investors search among several options to choose the reports that provide them the highest value. I find that the rational informed investor with a searching rule, incorporates both the news about an asset as well as the consistency or volatility of these news, and for two options with the same signal, he prefers the one with the most consistency.

• Item Type: MPRA Paper
• English Title: Investors' Information Choice
• Language: English
• Keywords: Forecast Error, Searching Rule, Fundamental Value, Informed Investor
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations ; Speculations; G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services ; Computer Software

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