The Asset Pricing Implications of Plausible Deniability

Kerry Back, Bruce I. Carlin and Seyed Mohammad Kazempour

No 28348, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We derive the effect of plausible deniability on asset risk premia in a dynamic setting with correlated firm values, systematic risk, and risk-averse investors. Firms optimally exercise American disclosure options, which are more valuable due to the possibility that other correlated firms may disclose high values, lifting investors' perceptions of the values of nondisclosing firms. Risk premia rise (and average prices fall) prior to disclosures, because investors make inferences about aggregate risks from failures to disclose, resulting in higher state prices for bad states.

JEL-codes: D21 D82 G12 G14 (search for similar items in EconPapers)
Date: 2021-01
Note: AP CF IO POL
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w28348.pdf (application/pdf)

Related works:
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:nbr:nberwo:28348

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28348

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().