Advanced Search
MyIDEAS: Login to save this paper or follow this series

Risk Neutral Investors Do Not Acquire Information¤

Contents:

Author Info

  • Muendler, Marc-Andreas

Abstract

Give a risk neutral investor the choice to acquire a costly signal prior to Walrasian asset market equilibrium. She refuses to pay for the signal. The reason is that a risk neutral investor is indifferent between a risky stock or a safe bond in equilibrium and expects the same return to her portfolio ex ante, whether or not she acquires information. Risk neutral asset pricing thus implies the absence of costly information from asset price,unless non-Walrasian market conditions prevail. Non-Walrasian market conditions, however, get reflected in price beyond the asset's fundamental payoff value.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.escholarship.org/uc/item/8fg5g853.pdf;origin=repeccitec
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt8fg5g853.

as in new window
Length:
Date of creation: 01 Sep 2005
Date of revision:
Handle: RePEc:cdl:ucsdec:qt8fg5g853

Contact details of provider:
Postal: 9500 Gilman Drive, La Jolla, CA 92093-0508
Phone: (858) 534-3383
Fax: (858) 534-7040
Web page: http://www.escholarship.org/repec/ucsdecon/
More information through EDIRC

Related research

Keywords: information acquisition; risk neutrality; portfolio choice; rational expectations equilibrium;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Stutzer, Michael, 1996. " A Simple Nonparametric Approach to Derivative Security Valuation," Journal of Finance, American Finance Association, vol. 51(5), pages 1633-52, December.
  2. Cripps, Martin William & Keller, Godfrey & Rady, Sven, 2003. "Strategic Experimentation with Exponential Bandits," CEPR Discussion Papers 3814, C.E.P.R. Discussion Papers.
  3. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  4. Leland, Hayne E, 1992. "Insider Trading: Should It Be Prohibited?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 859-87, August.
  5. Gadi Barlevy & Pietro Veronesi, . "Information Acquisition in Financial Markets," CRSP working papers 360, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Söderlind, Paul & Svensson, Lars E O, 1997. "New Techniques to Extract Market Expectations from Financial Instruments," CEPR Discussion Papers 1556, C.E.P.R. Discussion Papers.
  7. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  8. Matthew O. Jackson & James Peck, 1997. "Asymmetric Information in a Competitive Market Game: Reexamining the Implications of Rational Expectations," Microeconomics 9711004, EconWPA.
  9. Jackwerth, Jens Carsten & Rubinstein, Mark, 1996. " Recovering Probability Distributions from Option Prices," Journal of Finance, American Finance Association, vol. 51(5), pages 1611-32, December.
  10. Kerry Back & Shmuel Baruch, 2004. "Information in Securities Markets: Kyle Meets Glosten and Milgrom," Econometrica, Econometric Society, vol. 72(2), pages 433-465, 03.
  11. P. Collin-Dufresne & R. Goldstein & J. Hugonnier, 2004. "A General Formula for Valuing Defaultable Securities," Econometrica, Econometric Society, vol. 72(5), pages 1377-1407, 09.
  12. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
  13. Hirshleifer, David & Subrahmanyam, Avanidhar & Titman, Sheridan, 1994. " Security Analysis and Trading Patterns When Some Investors Receive Information before Others," Journal of Finance, American Finance Association, vol. 49(5), pages 1665-98, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Muendler, Marc-Andreas, 2008. "Risk-neutral investors do not acquire information," Finance Research Letters, Elsevier, vol. 5(3), pages 156-161, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cdl:ucsdec:qt8fg5g853. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.