Optimal disclosure policy and undue diligence
AbstractWhile both public and private financial agencies supply asset markets with large quantities of information, they do not necessarily disclose all asset-related information to the general public. This observation leads us to ask what principles might govern the optimal disclosure policy for an asset manager or financial regulator. To investigate this question, we study the properties of a dynamic economy endowed with a risky asset, and with individuals that lack commitment. Information relating to future asset returns is available to society at zero cost. Legislation dictates whether this information is to be made public or not. Given the nature of our environment, nondisclosure is generally desirable. This result is overturned, however, when individuals are able to access hidden information - what we call undue diligence - at sufficiently low cost. Information disclosure is desirable, in other words, only in the event that individuals can easily discover it for themselves.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 045.
Date of creation: Nov 2011
Date of revision:
Monetary policy; liquidity; financial markets;
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-CBA-2012-07-29 (Central Banking)
- NEP-CTA-2012-07-29 (Contract Theory & Applications)
- NEP-DGE-2012-07-29 (Dynamic General Equilibrium)
- NEP-MAC-2012-07-29 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary B. Gorton, 2008.
"The Subprime Panic,"
NBER Working Papers
14398, National Bureau of Economic Research, Inc.
- Prat, Andrea, 2003.
"The Wrong Kind of Transparency,"
CEPR Discussion Papers
3859, C.E.P.R. Discussion Papers.
- Andrea Prat, 2002. "The wrong kind of transparency," LSE Research Online Documents on Economics 3679, London School of Economics and Political Science, LSE Library.
- Andrea Prat, 2002. "The Wrong Kind of Transparency," STICERD - Theoretical Economics Paper Series 439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Andrea Prat, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
- Ricardo Lagos & Guillaume Rocheteau, 2004.
"Money and capital as competing media of exchange,"
341, Federal Reserve Bank of Minneapolis.
- Federal Reserve Bank of St. Louis & David Andolfatto, 2010.
"On the Social Cost of Transparency in Monetary Economies,"
2010 Meeting Papers
980, Society for Economic Dynamics.
- David Andolfatto, 2010. "On the social cost of transparency in monetary economies," Working Papers 2010-001, Federal Reserve Bank of St. Louis.
- Aleksander Berentsen & Guillaume Rocheteau, 2004.
"Money and Information,"
Review of Economic Studies,
Wiley Blackwell, vol. 71(4), pages 915-944, October.
- Makoto Watanabe & Leo Ferraris, 2007.
"Collateral Secured Loans in a Monetary Economy,"
2007 Meeting Papers
121, Society for Economic Dynamics.
- Citanna, Alessandro & Villanacci, Antonio, 2000.
"Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices,"
Journal of Economic Theory,
Elsevier, vol. 90(2), pages 222-253, February.
- Alessandro Citanna & Antonio Villanacci, . "Incomplete markets, allocative efficiency and the information revealed by prices," GSIA Working Papers 10, Carnegie Mellon University, Tepper School of Business.
- Allen, Franklin & Vayanos, Dimitri & Vives, Xavier, 2014. "Introduction to financial economics," Journal of Economic Theory, Elsevier, vol. 149(C), pages 1-14.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).
If references are entirely missing, you can add them using this form.