Information Choice in Macroeconomics and Finance (English, Laura L. Veldkamp)

Product description Review "The book is well structured and well written. . . . Veldkamp does an excellent job combining different streams of the literature of information choice. This book helped me a lot to give a structure to my partial knowledge on imperfect information."---Christian Merkl, Journal of Economics From the Inside Flap "This book synthesizes and extends recent research on the role that imperfect and dispersed information plays in macroeconomics and finance. By way of many examples and applications, Laura Veldkamp forcefully argues that research in this area should more strongly emphasize how information is produced and exchanged, and how agents choose their information. The book discusses new modeling approaches and new applications, draws many connections between different topics, and covers new techniques. While covering this new theoretical ground, Veldkamp insists on explaining stylized facts, addressing empirical puzzles, and generating testable predictions."--Pierre-Olivier Weill, University of California, Los Angeles From the Back Cover "This book synthesizes and extends recent research on the role that imperfect and dispersed information plays in macroeconomics and finance. By way of many examples and applications, Laura Veldkamp forcefully argues that research in this area should more strongly emphasize how information is produced and exchanged, and how agents choose their information. The book discusses new modeling approaches and new applications, draws many connections between different topics, and covers new techniques. While covering this new theoretical ground, Veldkamp insists on explaining stylized facts, addressing empirical puzzles, and generating testable predictions."--Pierre-Olivier Weill, University of California, Los Angeles About the Author Laura L. Veldkamp is associate professor of economics at New York University's Stern School of Business. Excerpt. © Reprinted by permission. All rights reserved. Information Choice in Macroeconomics and FinanceBy Laura L. VeldkampPRINCETON UNIVERSITY PRESSCopyright © 2011 Princeton University PressAll right reserved.ISBN: 978-0-691-14220-3ContentsAcknowledgments..................................................................ixPART I PRELIMINARIES.............................................................1Chapter 1 Why Study Information Choice?..........................................3Chapter 2 Bayesian Updating......................................................11Chapter 3 Measuring Information Flows............................................17Chapter 4 Games with Heterogeneous Information...................................29PART II INFORMATION CHOICE WITH COMPLEMENTARITY IN ACTIONS.......................47Chapter 5 Disclosing Public Information..........................................49Chapter 6 Informational Inertia and Price-Setting................................63PART III INFORMATION CHOICE WITH SUBSTITUTABILITY IN ACTIONS.....................83Chapter 7 Information Choice and Investment Choice...............................85Chapter 8 Returns to Scale in Information........................................107Chapter 9 Information as an Aggregate Shock......................................124PART IV MEASUREMENT..............................................................141Chapter 10 Testing Information Theories..........................................143Chapter 11 Conclusions...........................................................152References.......................................................................153Index............................................................................165Chapter One Why Study Information Choice? The developed world is becoming increasingly a knowledge-driven economy. Fewer and fewer workers are involved in producing goods. Instead, much of value added comes from activities such as consulting, forecasting, and financial analysis. Even traditional firms devote significant resources to activities such as managerial decision making, price-setting, and evaluating potential investments, each of which involves acquiring, processing, and synthesizing information. Most macroeconomic models focus on goods production. Similarly, most portfolio and asset-pricing theories derive the investment decisions that maximize investors' utility. Only a small body of research tells us about the information acquisition that regulates these production and investment decisions, even as the amount of resources devoted to information-related activities grows ever larger. This book examines macroeconomics and finance models where people choose what information they want to know. Every expectation, mean, variance, and covariance, every moment of every random variable, is conditional on some information set. Typically, we think of that information set as consisting of all the past realizations of the variable. But what if people do not know the entire history of all the realizations? Or, alternativ