EconPapers    
Economics at your fingertips  
 

Financial Disclosure and Market Transparency with Costly Information Processing

Marco Di Maggio and Marco Pagano

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study a model where some investors (“hedgers”) are bad at information processing, while others (“speculators”) have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from trading, hedgers do the same, depressing the asset price. Market transparency reinforces this mechanism, by making speculators’ trades more visible to hedgers. As a consequence, asset sellers will oppose both the disclosure of fundamentals and trading transparency. This is socially inefficient if a large fraction of market participants are speculators and hedgers have low processing costs. But in these circumstances, forbidding hedgers’ access to the market may dominate mandatory disclosure.

Date: 2012-10-23, Revised 2016-07-23
New Economics Papers: this item is included in nep-cta, nep-mic and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming in Review of Finance

Downloads: (external link)
http://www.csef.it/WP/wp323.pdf (application/pdf)

Related works:
Journal Article: Financial Disclosure and Market Transparency with Costly Information Processing* (2018) Downloads
Working Paper: Financial Disclosure and Market Transparency with Costly Information Processing (2014) Downloads
Working Paper: Financial disclosure and market transparency with costly information processing (2014) Downloads
Working Paper: Financial Disclosure and Market Transparency with Costly Information Processing (2012) Downloads
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:sef:csefwp:323

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante (info@csef.it).

 
Page updated 2025-03-23
Handle: RePEc:sef:csefwp:323