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Title:Information disclosure, intertemporal risk sharing, and asset prices PDF Logo
Authors:Dang, Tri Vi
Hakenes, Hendrik
Issue Date:2010
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2010,36
Abstract:Disclosure of information triggers immediate price movements, but it mitigates price movements at a later date, when the information would otherwise have become public. Consequently, disclosure shifts risk from later cohorts of investors to earlier cohorts. Hence, disclosure policy can be interpreted as a tool to control interim asset price movements, and to allocate risk intertemporally. This paper shows that a policy of partial disclosure (and, hence, of intertemporal risk sharing) can maximize, but surprisingly also minimize, the market value of the firm. Our model also applies to a setting where a central bank chooses the quality and frequency of the disclosure of macroeconomic information, or to the precision of disclosure by (distressed) banks.
Subjects:financial reporting
disclosure
information policy
asset pricing
intertemporal risk sharing
general equilibrium
JEL:G14
D92
M41
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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