Is faster information transmission always better?

Yu Yan, Yan Tong and Yiming Wang

Finance Research Letters, 2025, vol. 75, issue C

Abstract: This paper establishes a continuous-time heterogeneous beliefs model to investigate the impact of information transmission speed on welfare. We calibrate the required parameters using real data from the S & P 500. Numerical simulations based on this calibration indicate that faster information transmission leads to increased volatility in risky assets, thereby reducing the level of trader welfare. The combined study of theory and numerical simulation shows that liquidity constraints and short-selling constraints are equivalent to reducing the speed of information diffusion, which in turn can enhance trader welfare. In summary, policymakers may consider releasing some preliminary information before announcing new policies.

Keywords: Information transmission; Heterogeneous beliefs; Trader welfare; Short-sale constraints; Liquidity constraints (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000169

DOI: 10.1016/j.frl.2025.106751

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