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.
Document Object Identifier (DOI): 10.3386/w23958
Published: Marianne Andries & Valentin Haddad, 2020. "Information Aversion," Journal of Political Economy, vol 128(5), pages 1901-1939.
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