Information Disclosure, Intertemporal Risk Sharing, and Asset Prices
Disclosure of information triggers immediate price movements, but it mitigates price movements at a later date, when the information would otherwise have become public. Consequently, disclosure shifts risk from later cohorts of investors to earlier cohorts. Hence, disclosure policy can be interpreted as a tool to “control” interim asset price movements, and to allocate risk intertemporally. This paper shows that a policy of partial disclosure (and, hence, of intertemporal risk sharing) can maximize, but surprisingly also minimize, the market value of the firm. Our model also applies to a setting where a central bank chooses the quality and frequency of the disclosure of macroeconomic information, or to the precision of disclosure by (distressed) banks.
|Date of creation:||Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49-(0)228 / 91416-0
Fax: +49-(0)228 / 91416-55
Web page: http://www.coll.mpg.de/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:mpg:wpaper:2010_36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marc Martin)
If references are entirely missing, you can add them using this form.