Optimal disclosure policy and undue diligence

David Andolfatto (), Aleksander Berentsen and Christopher Waller

No 2012-001, Working Papers from Federal Reserve Bank of St. Louis

Abstract: While both public and private financial agencies supply asset markets with large amounts of information, they do not generally disclose all asset-related information to the general public. This observation leads us to ask what principles might govern the optimal disclosure policy for an asset manager or financial regulator. To investigate this question, we study the properties of a dynamic economy endowed with a risky asset, and with individuals that lack commitment. Information relating to future asset returns is available to society at zero cost. Legislation dictates whether this information is to be made public or not. Given the properties of our environment, nondisclosure is generally desirable. This result is overturned, however, when individuals are able to access hidden information?what we call undue diligence?at sufficiently low cost. Information disclosure is desirable, in other words, only to the extent that individuals can easily discover it for themselves.

Keywords: Disclosure of information; Banks and banking - Regulations (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-cta and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2012/2012-001.pdf Full text (application/pdf)

Related works:
Journal Article: Optimal disclosure policy and undue diligence (2014)
Working Paper: Optimal disclosure policy and undue diligence (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2012-001

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2012.001

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().