Entropy and the value of information for investors

Antonio Cabrales, Olivier Gossner and Roberto Serrano

No 2010-17, Working Papers from Brown University, Department of Economics

Abstract: Consider any investor who fears ruin facing any set of investments that satisfy no-arbitrage. Before investing, he can purchase information about the state of nature in the form of an information structure. Given his prior, information structure is more informative than information structure if whenever he rejects at some price, he also rejects at that price. We show that this complete informativeness ordering is represented by the decrease in entropy of his beliefs, regardless of his preferences, initial wealth or investment problem. It is also shown that no prior-independent informativeness ordering based on similar premises exists.

Keywords: informativeness; information structures; entropy; decision under uncertainty; investment; Blackwell ordering. (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Entropy and the Value of Information for Investors (2013)
Working Paper: Entropy and the Value of Information for Investors (2013)
Working Paper: Entropy and the Value of Information for Investors (2013)
Working Paper: Entropy and the value of information for investors (2011)
Working Paper: Entropy and the value of information for investors (2011)
Working Paper: Entropy and the value of information for investors (2011)
Working Paper: Entropy and the value of information for investors (2010)
Working Paper: Entropy and the value of information for investors (2010)
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