Information evalutation in capital markets (Q1072416)

The value of information for the problem of portfolio planning is explicitly determined, namely for the case of fixed prices not influenced by the information activity as well as within the scope of a market model. These explicit results allow several conclusions, in particular about the influence of preknowledge, risk aversion, information precision and information dissemiation on their value. The Bayesian decision theory is the basis for this paper. Correspondingly, a subjective concept of probability is underlying, and the information processing and evaluation is understood in a statistical sense. As one might expect, the question about the correctness of an information is not treated, although manipulating the asset prices by deliberate desinformation can be observed in practice. From the assumptions generally made there is actually only one missing namely the one of information efficiency. This one says that the entire relevant information is available free-of-charge for each investor and already reflected fully in the prices at each moment. All investors have as rationally acting individuals at all instants correspondingly equal expectations. Thus the main topic of the book is: How is information to be evaluated which is not necessarily available to all investors? The theoretical reason of assuming the information efficiency hypothesis is that only in this way homogeneous expectations for all investors can be proved. This property considerably simplifies the theoretical as well as the empirical treatment of the problems, but contradicts to the entire practical experience. Correspondingly, always inhomogeneous expectations of the investors are assumed where the homogeneity is included as an (unlikely) special case.