We develop and empirically test a model of information acquisition in capital markets. In the model, we assume that investors are uncertain about the quality of the private information before they acquire it. As a result, investors use prior prices and public information as a screen to estimate the value of available private information and efficiently allocate their limited information processing capacity across firms. The model predicts that larger unexplained price movements lead to more private information acquisition, higher future price volatility, and higher future trading volumes. Using fine-grained data measuring information acquisition on Edgar and Bloomberg, we provide empirical evidence in support of the model’s predictions.