publication . Preprint . 2010

Information Aggregation and Investment Decisions

Christian Hellwig; Aleh Tsyvinski; Elias Albagli;
Open Access
  • Published: 01 Jan 2010
This paper studies an environment in which information aggregation interacts with investment decisions. The first contribution of the paper is to develop a tractable model of such interactions. The second contribution is to solve the model in closed form and derive a series of implications that result from the interplay between information aggregation and the value of market information for the firms' decision problem. We show that the model generates an information aggregation wedge between price and expected dividend value. The information aggregation wedge is asymmetric: larger on the upside, when there is a lot of investment, and shares are over-valued, than...
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