Information acquisition and under-diversification
By: Stijn Van Nieuwerburgh, Laura Veldkamp.
Contributors: Veldkamp, Laura.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13904; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13904.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "If an investor wants to form a portfolio of risky assets and can exert effort to collect information on the future value of these assets before he invests, which assets should he learn about? The best assets to acquire information about are ones the investor expects to hold.  But the assets the investor holds depend on the information he observes.  We build a framework to solve jointly for investment and information choices, with a variety of preferences and information cost functions.  Although the optimal research strategies depend on preferences and costs, the main result is that the investor who can first collect information systematically deviates from holding a diversified portfolio.  Information acquisition can rationalize investing in a diversified fund and a concentrated set of assets, an allocation often observed, but usually deemed anomalous"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/25/2008.

Includes bibliographical references.

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Mode of access: World Wide Web.