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Government Intervention and Information Aggregation by Prices




Governments intervene in firms' lives in a variety of ways. To enhance the efficiency of government intervention, many researchers and policy makers call for governments to make use of information contained in stock market prices. However, price informativeness is endogenous to government policy. We analyze government policy in light of this endogeneity. In some cases, it is optimal for a government to commit to limit its reliance on market prices to avoid harming the aggregation of information into market prices. For similar reasons, it is optimal for a government to limit transparency in some dimensions.

Suggested Citation

  • Philip Bond & Itay Goldstein, 2015. "Government Intervention and Information Aggregation by Prices," Journal of Finance, American Finance Association, vol. 70(6), pages 2777-2812, December.
  • Handle: RePEc:bla:jfinan:v:70:y:2015:i:6:p:2777-2812

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    Cited by:

    1. Romain Baeriswyl & Camille Cornand & Bruno Ziliotto, 2016. "Observing and shaping the market: the dilemma of central banks," Working Papers 1623, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. repec:eee:finsta:v:37:y:2018:i:c:p:49-59 is not listed on IDEAS
    3. repec:eee:jfinec:v:131:y:2019:i:1:p:118-138 is not listed on IDEAS
    4. repec:eee:jetheo:v:175:y:2018:i:c:p:447-490 is not listed on IDEAS
    5. Elchanan Ben-Porath & Eddie Dekel & Barton L Lipman, 2018. "Disclosure and Choice," Review of Economic Studies, Oxford University Press, vol. 85(3), pages 1471-1501.
    6. Braz Camargo & Kyungmin Kim & Benjamin Lester, 2016. "Information Spillovers, Gains from Trade, and Interventions in Frozen Markets," Review of Financial Studies, Society for Financial Studies, vol. 29(5), pages 1291-1329.
    7. repec:eee:jetheo:v:177:y:2018:i:c:p:34-69 is not listed on IDEAS
    8. Raphael Boleslavsky & Christopher Hennessy & David L. Kelly, 2017. "Markets vs. Mechanisms," Working Papers 2017-11, University of Miami, Department of Economics.
    9. Boleslavsky, Raphael & Kelly, David L. & Taylor, Curtis R., 2017. "Selloffs, bailouts, and feedback: Can asset markets inform policy?," Journal of Economic Theory, Elsevier, vol. 169(C), pages 294-343.
    10. repec:eee:jfinec:v:131:y:2019:i:2:p:251-268 is not listed on IDEAS
    11. Piccolo, Alessio & Shapiro, Joel, 2017. "Credit Ratings and Market Information," CEPR Discussion Papers 11961, C.E.P.R. Discussion Papers.
    12. repec:spr:joecth:v:66:y:2018:i:4:d:10.1007_s00199-017-1081-9 is not listed on IDEAS
    13. repec:eee:jetheo:v:179:y:2019:i:c:p:240-274 is not listed on IDEAS
    14. Antonio Falato & Diana A. Iercosan & Filip Zikes, 2019. "Banks as Regulated Traders," Finance and Economics Discussion Series 2019-005, Board of Governors of the Federal Reserve System (US).
    15. repec:eee:finmar:v:44:y:2019:i:c:p:42-70 is not listed on IDEAS

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