Information loss from perception alignment

Omid M. Ardakani, Viktoria Dalko and Hyeeun Shim

International Review of Economics & Finance, 2025, vol. 97, issue C

Abstract: This paper examines how synchronized investor perceptions of future asset returns affect market information dynamics. We introduce an empirical framework that applies information-theoretic measures, such as Kullback–Leibler and Jensen–Shannon divergences, to quantify the extent of perception alignment among investors and its impact on information loss. The findings show that heightened perception alignment increases information loss, especially during the COVID-19 pandemic. The findings emphasize our ability to measure information loss and capture shifts in investor behavior, with applications extending to various markets and events.

Keywords: Information theory; Perception alignment; Divergence measures (search for similar items in EconPapers)
JEL-codes: G12 G14 G17 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056024008220
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:97:y:2025:i:c:s1059056024008220

DOI: 10.1016/j.iref.2024.103830

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().