Learning with Information Capacity Constraints
Motivated by the fact that investors have limited time and attention to process information, this paper provides a continuous-time equilibrium model to analyze the effects of a capacity constraint in the learning process of a representative investor, who optimally allocates her information capacity across multiple sources of uncertainty. Consequently, the cross-sectional structure of information and the resulting asset price dynamics are determined endogenously. The model provides implications on both consumption behavior and the cross-sectional differences in price informativeness in terms of supply of information, speed of price adjustments to fundamental shocks, and price reactions to firm disclosures.
Volume (Year): 40 (2005)
Issue (Month): 02 (June)
|Contact details of provider:|| Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK|
Web page: http://journals.cambridge.org/jid_JFQ
When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:40:y:2005:i:02:p:307-329_00. 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: (Keith Waters)
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.