The main features of households' attention to savings are rationalized by a model of information aversion, a preference-based fear of receiving flows of news. In line with the empirical evidence, information averse investors observe the value of their portfolios infrequently; inattention is more pronounced for more risk averse investors and in periods of low or volatile stock prices. The model also explains how changes in information frequencies affect risk-taking decisions, as observed in the field and the lab. Further, we find that receiving state-dependent alerts following sharp downturns improves welfare, suggesting a role for financial intermediaries as information managers.
We gratefully acknowledge useful comments and suggestions by Fernando Alvarez, Markus Brunnermeier, Xavier Gabaix, Jacob Sagi, Stavros Panageas, Martin Schneider, Costis Skiadas, Laura Veldkamp, and seminar participants in TSE, Princeton, Yale SOM, NYU Stern, Northwestern Kellogg, Berkeley Haas, NY Fed, HEC Paris, INSEAD, UCSD, UCLA, and in the Miami Behavioral Finance, TIGER, Macro Finance Society, Finance Theory Group, SED, NAMES, European Summer Symposium in Financial Markets (Gerzensee), SITE conferences and NBER Summer Institute. The research leading to these results has received funding from the European Research Council under the European Community's Seventh Framework Programme (FP7/2007-2013) Grant Agreement no. 312503. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Marianne Andries & Valentin Haddad, 2020. "Information Aversion," Journal of Political Economy, vol 128(5), pages 1901-1939.