Estimating the Value of Information

Ohad Kadan and Asaf Manela

The Review of Financial Studies, 2019, vol. 32, issue 3, 951-991

Abstract: We derive a general expression for the value of information to a price-taking investor in a dynamic environment and provide a framework for its estimation. We study the value of both private and public information and break it into its instrumental and psychic parts. To illustrate, we estimate and rank the values of leading macroeconomic indicators (GDP, employment, etc.). Using variations in option prices, we find that consumer-investors with conventional preference parameters would pay 3 to 5 bps of their wealth for a one-time private peek into these indicators. Such signals provide substantial instrumental value but a minor psychic value.Received August 29, 2016; editorial decision June 6, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhy087 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:rfinst:v:32:y:2019:i:3:p:951-991.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().