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Disclosure to an Audience with Limited Attention

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  • Hirshleifer, David

    (Ohio State U)

  • Lim, Seongyeon

    (DePaul U)

  • Teoh, Siew Hong

    (Ohio State U)

Abstract

In our model, informed players decide whether or not to disclose, and observers allocate attention among disclosed signals, and toward reasoning through the implications of a failure to disclose. In equilibrium disclosure is incomplete, and observers are unrealistically optimistic. Nevertheless, regulation requiring greater disclosure can reduce observers’ belief accuracies and welfare. A stronger tendency to neglect disclosed signals increases disclosure, whereas a stronger tendency to neglect failures to disclose reduces disclosure. Observer beliefs are influenced by the salience of disclosed signals, and disclosure in one arena can crowd out disclosure in other fundamentally unrelated arenas.

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Bibliographic Info

Paper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2004-21.

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Date of creation: Oct 2004
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Handle: RePEc:ecl:ohidic:2004-21

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Cited by:
  1. Stefano DellaVigna & Joshua M. Pollet, 2009. "Capital Budgeting vs. Market Timing: An Evaluation Using Demographics," NBER Working Papers 15184, National Bureau of Economic Research, Inc.
  2. Stefano DellaVigna & Joshua M. Pollet, 2007. "Demographics and Industry Returns," American Economic Review, American Economic Association, American Economic Association, vol. 97(5), pages 1667-1702, December.
  3. Dong Lou, 2013. "Attracting investor attention through advertising," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 54382, London School of Economics and Political Science, LSE Library.
  4. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
  5. Hirshleifer, David & Teoh, Siew Hong, 2005. "Limited Investor Attention and Stock Market Misreactions to Accounting Information," Working Paper Series, Ohio State University, Charles A. Dice Center for Research in Financial Economics 2005-24, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  6. Florian Hoffmann & Roman Inderst & Marco Ottaviani, 2013. "Hypertargeting, Limited Attention, and Privacy: Implications for Marketing and Campaigning," Working Papers 479, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc.
  8. Vincze, János, 2010. "Miért és mitől védjük a fogyasztókat?. Aszimmetrikus információ és/vagy korlátozott racionalitás
    [Asymmetric information and/or bounded rationality: why are consumers protected and from
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 725-752.
  9. David Hirshleifer & Sonya Seongyeon Lim & Siew Hong Teoh, 2009. "Driven to Distraction: Extraneous Events and Underreaction to Earnings News," Journal of Finance, American Finance Association, American Finance Association, vol. 64(5), pages 2289-2325, October.
  10. Mark Bagnoli & Stanley Levine & Susan G. Watts, 2005. "Analyst estimation revision clusters and corporate events, Part II," Annals of Finance, Springer, Springer, vol. 1(4), pages 379-393, October.
  11. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2005. "Information Acquisition: Experimental Analysis of a Boundedly Rational Model," Levine's Bibliography 666156000000000480, UCLA Department of Economics.

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