Abstract
Information aversion, a preference-based fear of news flows, has rich implications for decisions involving information and risk-taking. It can explain key empirical patterns on how households pay attention to savings, namely that investors observe their portfolios infrequently, particularly when stock prices are low or volatile. Receiving state-dependent alerts following sharp market downturns such as during the financial crisis of 2008 improves welfare. Information averse investors display an ostrich behavior: overhearing negative news prompts more inattention. Their fear of frequent news encourages them to hold undiversified portfolios.
Replaces
Marianne Andries, and Valentin Haddad, “Information Aversion”, TSE Working Paper, n. 17-779, March 2017.
Reference
Marianne Andries, and Valentin Haddad, “Information Aversion”, Journal of Political Economy, vol. 128, n. 5, 2020, pp. 1901–1939.
Published in
Journal of Political Economy, vol. 128, n. 5, 2020, pp. 1901–1939