An investor who wants to invest a certain amount and to whom a lot of more or less risky alternatives arise would divide this amount among several securities. He makes this portfolio decision because of his expectations with regard to these assets which result from the information available to him. If the investor obtains additional information, then his knowledge would improve and, therefore, the portfolio decision made by him. Accordingly, he will be ready to accept certain costs related to the information procurement. The value of information indicates the maximum tolerable information costs, and its knowledge, therefore, enables - by comparing with the actual information costs - to evaluate the profitability of an information procurement. In this book, the value of information for the problem of portfolio planning is explicitly determined, namely as well for the case of fixed prices not influenced by the information activity as within the scope of a market model. These explicit results allow several conclusions, in particular about the influence of preknowledge, risk aversion, information precision and information dissemination on their value.
The Bayesian decision theory is the basis for this paper. Corres- pondingly, a subjective concept of probability is underlying, and the information processing and evaluation is understood in a sta- tistical sense. As one might expect, the question about the correct- ness of an information is not treated, although manipulating the asset prices by deliberate dis information can be observed in prac- tice and is, certainly, an interesting problem.
1. Introduction and Summary.- 1.1 Portfolio Planning and Capital Market Models as Problems of Decision Theory.- 1.2 Information and Information Evaluation.- 1.3 Results.- 1.4 Literature Survey for the Treatment of the Information Evaluation Problems in the Capital Market Theory.- 2. Information Processing and Information Evaluation without Considering the Information Effected Price Changes: The Portfolio Approach.- 2.1 The Hybrid Model.- 2.2 Extensions of the Hybrid Model for the Case of Not Completely Known Prior Data.- 2.2.1 Risk Situation with Regard to the Prior Parameters: A Two-Level Bayes Approach.- 2.2.2 Risk Situation with Regard to the Prior Parameters: Lin's Approach.- 2.2.3 Partial Uncertainty with Regard to the Prior Parameters.- 2.3 Information Systems.- 2.4 Information Evaluation.- 2.4.1 The Expected Value of Information and the Amount of Information in the Hybrid Model.- 2.4.2 Unbiased, Normally Distributed Estimators in the Hybrid Model.- 2.4.3 Unbiased, Normally Distributed Estimators if a Risk Situation with Regard to the Prior Parameters is Assumed.- 2.4.4 Information Evaluation if Partial Uncertainty with Regard to the Prior Parameters is Assumed.- 3. Information Processing and Information Evaluation if Information Effected Changes of the Equilibrium Prices are Considered.- 3.1 Capital Market Equilibrium for Heterogeneous Expectations.- 3.2 Information Systems.- 3.3 Information Evaluation.- 4. Appendix.- References.
Series: Lecture Notes in Economic and Mathematical Systems
Number Of Pages: 108
Published: May 1986
Publisher: Springer-Verlag Berlin and Heidelberg Gmbh & Co. Kg
Country of Publication: DE
Dimensions (cm): 24.41 x 16.99
Weight (kg): 0.21