Endogenous Information Flows and the Clustering of Announcements

Viral Acharya, Peter DeMarzo and Ilan Kremer

American Economic Review, 2011, vol. 101, issue 7, 2955-79

Abstract: We consider the strategic timing of information releases in a dynamic disclosure model. Because investors don't know whether or when the firm is informed, the firm will not necessarily disclose immediately. We show that bad market news can trigger the immediate release of information by firms. Conversely, good market news slows the release of information by firms. Thus, our model generates clustering of negative announcements. Surprisingly, this result holds only when firms can preemptively disclose their own information prior to the arrival of external information. These results have implications for conditional variance and skewness of stock returns. (JEL D21, D83, G12, G14, L11)

Date: 2011
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Related works:
Working Paper: Endogenous Information Flows and the Clustering of Announcements (2011)
Working Paper: Endogenous Information Flows and the Clustering of Announcements (2010)
Working Paper: Endogenous Information Flows and the Clustering of Announcements (2008)
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