| This thesis develops a theory of endogenous information asymmetry in dynamic financial markets.;The first chapter, titled "Information Trade-Offs in Dynamic Financial Markets", develops a model of information acquisition in dynamic financial markets. In equilibrium, prices reflect investors' expectations about the cash flows and the supply of a risky asset. Contrary to static models, supply has a significant informational role in markets because it predicts capital gains. Investors decide whether to obtain superior information about dividends at a cost, which also enables them to learn information about supply. Investors who decide to be uninformed learn about dividends and supply from prices. As more informed investors enter the economy, prices become more informative about dividends but less informative about supply. This trade-off creates complementarities in information acquisition. As a result, the information market has multiple equilibria, each with different implications for the financial market.;Whereas the first chapter uses a model with two trading periods to exhibit the information trade-off, the chapter titled "The Value of Information in Continuous Time" addresses how the information-market equilibrium works in an economy with more than two periods by deriving the value of information in the limiting case of continuous time and infinite horizon. The effects displayed in the simpler two-period model are also present in the richer model in continuous time. A further motivation for this derivation is to connect with existing literature where the information asymmetry is fixed exogenously.;The last chapter, "Intertemporal Information Acquisition", generalizes the setup of the first chapter by constructing a jointly intertemporal equilibrium of asset prices and information acquisition. Whereas in the model of the first chapter the information market operates only in the beginning of the economy, in this chapter there is an information acquisition opportunity before every trading period. The construction of this equilibrium opens up new avenues for the study of intertemporal information effects in prices. |
