Why Do Large Investors Disclose Their Information?

Ying Liu
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Ying Liu: University of Lausanne and Swiss Finance Institute

No 18-17, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Large investors often advertise private information at private talks or in the media. To analyse the incentives for information disclosure, I develop a two-period Kyle (1985) type model in which an informed short-horizon investor strategically discloses private information to enhance price efficiency. I show that information disclosure is optimal when the scope of private information is large and when the large investor has a high reputation. Short investment horizons induce information disclosure among investors and are beneficial for price efficiency. However, strategic information disclosure reduces trading before disclosure and harms price discovery.

Keywords: Information Disclosure; Price Discovery; Asymmetric Information; Market Microstructure (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2018-03
New Economics Papers: this item is included in nep-mic and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1817

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