Risk-averse investors benefit from rational information choice in financial markets
The study shows that in financial markets, investors make rational choices about acquiring information to make decisions. When investors are risk averse and asset markets are large, they value new information that helps them predict asset prices. More signals lead to lower expected returns, preventing investors from seeking unlimited information. However, the benefits of information sharing among investors can lead to more efficient markets. Overall, the study highlights the complex relationship between information acquisition, investor behavior, and market outcomes.