Entropy and the value of information for investors

Antonio Cabrales, Olivier Gossner and Roberto Serrano

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Consider any investor who fears ruin facing any set of investments that satisfy noarbitrage. Before investing, he can purchase information about the state of nature in the form of an information structure. Given his prior, information structure α is more informative than information structure β if whenever he rejects α at some price, he also rejects β 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)
JEL-codes: C00 C43 D00 D80 D81 G00 G11 (search for similar items in EconPapers)
Date: 2011-03
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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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 (2010)
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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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we1104

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