We propose a theory of inattention solely based on preferences, absent any cognitive limitations, or external costs of acquiring information. Under disappointment aversion, information decisions and risk attitude are intertwined, and agents are intrinsically information averse. We illustrate...

We construct a new systemic risk measure that quantifies vulnerability to fire-sale spillovers using detailed regulatory balance sheet data for U.S. commercial banks and repo market data for broker-dealers. Even for moderate shocks in normal times, fire-sale externalities can be substantial. For...

We provide a rational model of capital allocation to projects with uncertain exposure to a systematic risk factor. We show that signal-to-noise ratios are highest when the factor realization is close to zero. As a result, investors redirect more resources across projects during these times. This...

To answer this question, we first create a measure of the opportunity costs of holding liquid assets as the wedge between the cost of capital and the return of firms’ cash portfolio. Exploiting both cross-sectional and time-series variation of opportunity costs, we estimate a negative...