Information In Financial Markets

Despite the title, the topic of the course is the data economy. This is a full semester course. It draws on tools from macroeconomics, finance, game theory, monetary economics and IO. The focus is on theories, with a discussion of measurement approaches. We will start with the tools – Bayesian learning, entropy / rational inattention, information frictions problems, and strategic games with heterogeneous information. Then we will use these tools to build up a dynamic model with data production, data depreciation, data markets, platforms. We’ll consider financial data as a special case. These tools can be used for studying market power, regulation and welfare, firm dynamics, optimal taxation. I’ll point to many open questions for research that the tools of the class could be used to answer. We will also talk about best practices for doing theory research in economics. What makes a theory valuable? How do you choose the ingredients to include in a model? How do you get the motivation just right? How does one get theory or applied theory published in increasingly empirical fields?