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Conference Paper: Delegated information acquisition and asset pricing

TitleDelegated information acquisition and asset pricing
Authors
KeywordsInformation acquisition
Optimal contract
Complementarities
Issue Date2016
Citation
The 14th Annual Conference of the China International Conference in Finance (CICF), Xiamen, China, 7-10 July 2016. How to Cite?
AbstractThis paper studies the joint determination of optimal contracts and equilibrium asset prices in an economy with multiple principal-agent pairs. Principals design optimal contracts that provide incentives for agents to acquire costly information. With agency problems, the agents' compensation depends on the accuracy of their forecasts for asset prices and payoffs. Complementarities in information acquisition delegation arise as follows. As more principals hire agents to acquire information, asset prices become less noisy. Consequently, agents are more willing to acquire information because they can forecast asset prices more accurately, thus mitigating agency problems and encouraging other principals to hire agents. This mechanism can explain many interesting phenomena in markets, including multiple equilibria, herding, home bias and idiosyncratic volatility comovement.
Persistent Identifierhttp://hdl.handle.net/10722/233165

 

DC FieldValueLanguage
dc.contributor.authorHuang, S-
dc.date.accessioned2016-09-20T05:34:59Z-
dc.date.available2016-09-20T05:34:59Z-
dc.date.issued2016-
dc.identifier.citationThe 14th Annual Conference of the China International Conference in Finance (CICF), Xiamen, China, 7-10 July 2016.-
dc.identifier.urihttp://hdl.handle.net/10722/233165-
dc.description.abstractThis paper studies the joint determination of optimal contracts and equilibrium asset prices in an economy with multiple principal-agent pairs. Principals design optimal contracts that provide incentives for agents to acquire costly information. With agency problems, the agents' compensation depends on the accuracy of their forecasts for asset prices and payoffs. Complementarities in information acquisition delegation arise as follows. As more principals hire agents to acquire information, asset prices become less noisy. Consequently, agents are more willing to acquire information because they can forecast asset prices more accurately, thus mitigating agency problems and encouraging other principals to hire agents. This mechanism can explain many interesting phenomena in markets, including multiple equilibria, herding, home bias and idiosyncratic volatility comovement.-
dc.languageeng-
dc.relation.ispartofAnnual Conference of the China International Conference in Finance, CICF 2016-
dc.relation.ispartof2016中国金融际年会-
dc.subjectInformation acquisition-
dc.subjectOptimal contract-
dc.subjectComplementarities-
dc.titleDelegated information acquisition and asset pricing-
dc.typeConference_Paper-
dc.identifier.emailHuang, S: huangsy@hku.hk-
dc.identifier.authorityHuang, S=rp02052-
dc.identifier.hkuros263265-

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