Abstract
This paper provides a new empirical strategy for testing models of information choice based on observing which types of information are consumed and incorporated into asset prices. Consistent with the predictions of the information driven comovement hypothesis (Veldkamp 2006), we find that stock price comovement is stronger when investors consume qualitative information about firms whose payoffs covary strongly with many others. Furthermore, as aggregate correlation falls, so does the demand for these high covariance signals. Our findings imply that investor information consumption choices are shaped by a market for information, and that these choices can drive excessive stock price comovement.
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