We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrele- vance result: when a positive fraction of rational agents (endogenously) decides to become informed in equilibrium,...

We study information sales in financial markets with strategic risk-averse traders. Our main result establishes that the optimal selling mechanism is one of the following two: (i) sell to as many agents as possible very imprecise information; (ii) sell to a single agent a signal as precise as...

We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result: when a positive fraction of rational agents (endogeneously) decides to become informed in equilibrium, prices...

This paper shows that stocks of truly local firms have returns that exceed the return on stocks of geographically dispersed firms by 70 basis points per month. By extracting state name counts from annual reports filed with the SEC on form 10-K, we distinguish firms with business operations in...

In this technical appendix we extend the results in the paper “Information sales and strategic trading.” We study the problem of a monopolist selling information to a set of risk-averse traders. We first analytically reduce the seller's problem to a simple constrained optimization, allowing...

We study a standard machine learning algorithm (Taddy, 2013) to measure sentiment in financial documents. Our empirical approach relies on stock price reactions to colour words, providing as output dictionaries of positive and negative words. We compare head-to-head the performance of the...

This paper studies the content of financial news as a function of past market returns. As a proxy for media content we use positive and negative word counts from general financial news columns from the Wall Street Journal and the New York Times. Our empirical analysis allows us to discriminate...

We study the classical problem of raising capital under asymmetric information. Following Myers and Majluf (1984), we consider firms endowed with assets in place and riskier growth opportunities. When asymmetric information is concentrated on assets in place (rather than growth opportunities),...

This paper studies a standard mechanism design problem where the principal's allocation rule is multi-dimensional, and the agent's private information is a one-dimensional continuous variable. Under standard assumptions, that guarantee monotonicity of the allocation rule in one-dimensional...