Alessia Menichetti
I am a Ph.D. student at the Finance department of the Stockholm School of Economics and at the Swedish House of Finance. My research is mostly theoretical and my fields of interests include asset pricing, household finance, and information economics. In my research, I study how retail investors and households’ financial decisions are affected by the information they receive, under full and bounded rationality.
Prior to joining the PhD program at SSE, I was a trainee in DG-Monetary Policy at the European Central Bank and in DG-ECFIN at the European Commission. I hold a B.Sc. in International Economics, Management and Finance (major in Finance) from Bocconi University, a M.Sc. Finance from Bocconi University and a M.Sc. Finance and Investments from Rotterdam School of Management, Erasmus University (double-degree program).
Job market paper: Information concentration, correlation neglect and financial markets
Abstract: As the informational landscape grows increasingly intricate, forming accurate be-
liefs to ensure unbiased decision-making becomes progressively challenging, one reason being the rapid and vast replication of information across online outlets, which may
result in the misinterpretation of old information as new. Concerns about the impact that informational complexity may have on financial market trading are exacerbated by the recent rise in retail investors’ activity. To address this question, I propose an asset pricing model with agents categorized into belief groups that receive a private signal containing group-level noise. However, these individuals disagree on the distribution of private information, neglecting the correlation between the signals they receive and those of their peers, as well as between their peers. Correlation neglect results in an overreaction to new information that positively affects price informativeness, which in turns reduces returns volatility. Consistently with the existing empirical evidence on correlation neglect, information repetition and social media activity of retail investors, this model predicts generally higher trading volumes and slower mean reversion under correlation neglect. Information concentration plays a key role in affecting the severity of the bias, which is highest under concentrated yet non-monopolistic information and lowest under perfectly competitive information.