Ganguli, J and Condie, S and Illeditsch, PK (2012) Information Inertia. UNSPECIFIED. University of Essex, Department of Economics, Economics Discussion Papers.
Ganguli, J and Condie, S and Illeditsch, PK (2012) Information Inertia. UNSPECIFIED. University of Essex, Department of Economics, Economics Discussion Papers.
Ganguli, J and Condie, S and Illeditsch, PK (2012) Information Inertia. UNSPECIFIED. University of Essex, Department of Economics, Economics Discussion Papers.
Abstract
We study how information about an asset affects optimal portfolios and equilibrium asset prices when investors are not sure about the model that predicts future asset values and thus treat the information as ambiguous. We show that this ambiguity leads to optimal portfolios that are insensitive to news even though there are no information processing costs or other market frictions. In equilibrium, we show that stock prices may not react to public information that is worse than expected and this mispricing of bad news leads to profitable trading strategies based on public information.
| Item Type: | Monograph (UNSPECIFIED) |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
| SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
| Depositing User: | Unnamed user with email elements@essex.ac.uk |
| Date Deposited: | 14 Feb 2013 16:07 |
| Last Modified: | 16 May 2024 18:45 |
| URI: | http://repository.essex.ac.uk/id/eprint/5628 |
Available files
Filename: dp719.pdf