Information Disclosure, Intertemporal Risk Sharing, and Asset Prices

Tri Vi Dang () and Hendrik Hakenes
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Tri Vi Dang: Yale University, Department of Economics

No 2010_36, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

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.

Keywords: Financial reporting; disclosure; information policy; asset pricing; intertemporal risk sharing; general equilibrium (search for similar items in EconPapers)
JEL-codes: D92 G14 M41 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-cba
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_36

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