Information: Hard and Soft
Information is an essential component of all financial markets and transactions. However, information can arrive in multiple forms. In this paper, we begin to define what is meant by hard and soft information. Hard information is quantitative, easy to store and transmit in impersonal ways, and its information content is independent of the collection process. Technology has changed and continues to change the way we collect, process, and communicate information. This has fundamentally transformed the way financial markets and institutions operate. One of these changes is a greater reliance on hard relative to soft information in financial transactions. This has altered the design of financial institutions by moving decisions outside the traditional boundaries of organizations. We discuss the advantages and limits of hard and soft information and the possible consequences of hardening information on both financial markets and institutions. We provide several applications of soft information and avenues of future research.