During the 2007-2008 financial crisis, countries that were relatively more exposed to the crisis epicenter, the United States, were among the least affected. This counters the intuition that the impact of a shock increases with exposure to it, and raises the question of the mechanism through which the impact of shocks can decrease with exposure. I propose a model in which decision-makers learn about the risk factors they are exposed to, but have limited capacity to process information. I find that decision-makers optimally choose to learn more about the risk factors they are more exposed to, and this informational advantage mitigates the negative consequences of shocks by enabling them to take better investment decisions. Relative to an exogenous information benchmark, the endogenous information model I propose predicts that shocks to risk factors that decision-makers are relatively less exposed to are amplified. By the same token, shocks to risk factors that decision-makers are relatively more exposed to are attenuated. 

Keywords: Rational Inattention, Corporate Investment, Shock Amplification
JEL Classification: G01, G15, D81, D83​