Information value and its decomposition

We study optimal strategy and the value of information for a risk-averse investor who observes private signals in a continuous-time framework. Our main findings are as follows. Although information about specific assets can influence an investor’s perception of the values of both informed and uninformed assets, it does not affect the optimal investment policy for the uninformed assets. Information may reduce the investor’s utility even if acquiring information is non-detrimental. When information is aggregated, its value can be additive, subadditive, or superadditive, depending on signal-to-noise asymmetries and noise correlations. A static decision regarding information acquisition is equivalent to a dynamic decision. The ex ante value of information can be interpreted as risk-sensitive mutual information.