Disclosures and Asset Returns
AbstractPublic information in financial markets often arrives through the disclosures of interested parties who have a material interest in the reactions of the market to the new information. When the strategic interaction between the sender and the receiver is formalized as a disclosure game with verifiable reports, equilibrium prices can be given a simple characterization in terms of the concatenation of binomial pricing trees. There are a number of empirical implications. The theory predicts that the return variance following a poor disclosed outcome is higher than it would have been if the disclosed outcome were good. Also, when investors are risk averse, this leads to negative serial correlation of asset returns. Other points of contact with the empirical literature are discussed. Copyright The Econometric Society 2003.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 71 (2003)
Issue (Month): 1 (January)
Other versions of this item:
- Shin, Hyun Song, 2002. "Disclosures and Asset Returns," CEPR Discussion Papers 3345, C.E.P.R. Discussion Papers.
- Hyun Song Shin, 2001. "Disclosures and Asset Returns," FMG Discussion Papers dp371, Financial Markets Group.
- Hyun Song Shin, 2001. "Disclosures and asset returns," LSE Research Online Documents on Economics 25044, London School of Economics and Political Science, LSE Library.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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