Article

Information Aversion

Marianne Andries, and Valentin Haddad

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, 2019, forthcoming.

Published in

Journal of Political Economy, 2019, forthcoming