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Date of Award
Olin Business School
Doctor of Philosophy (PhD)
In financial markets, investors with different limitations in their access and capacity to process information interact on a daily basis. This dissertation examines the impact of these limitations in explaining different phenomena that are observed in practice. First, I theoretically study the role of risk limits in risk management, and show how they not only help to alleviate the limitations of traders to correctly analyze the collected information, but also convey benefits in the provision of incentives. Second, I analyze the effect of changes in the credit rating of firms on the informativeness of their corresponding stock price when some investors can overreact to salient information, thus affecting overall incentives to acquire information. Third, I examine how heterogeneous beliefs about the ability of a firm’s CEO between insiders and outside investors, and the varying quality of the information that is available to each of them, shape the compensation contract offered to the executive.
Chair and Committee
Philip H. Dybvig
Anjan Thakor, Jeongmin Lee, Jason R. Donaldson, John Nachbar,
Vega San Martin, Diego, "Essays on Trading with Limited Capacity to Process Information" (2017). Arts & Sciences Electronic Theses and Dissertations. 1165.
Available for download on Saturday, May 15, 2117