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Paradox of Public Information Disclosure in the Presence of an Asset Market

Author

Listed:
  • Seongkyun Kim

    (Yonsei University)

  • Myungkyu Shim

    (Yonsei University)

Abstract

When financial market collapses, policymakers tend to disclose more public information to traders (e.g., more frequent communication with public) in order to reduce uncertainty surrounding the market and thus revive demand for risky assets. Can such a disclosure policy achieve its objective? In order to address this issue, we augment an exogenous public signal to the model of Angeletos and Werning (2006) and Rondina and Shim (2015) so that both exogenous and endogenous public information coexist. After proving that there exist equilibria in our model economy, we show that provision of more precise exogenous public information to traders in turn can reduce the informativeness of the endogenous public signal (asset price), especially when such a policy is necessary.

Suggested Citation

  • Seongkyun Kim & Myungkyu Shim, 2025. "Paradox of Public Information Disclosure in the Presence of an Asset Market," Working papers 2025rwp-244, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2025rwp-244
    as

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    References listed on IDEAS

    as
    1. Cai, Zhifeng & Dong, Feng, 2023. "Public disclosure and private information acquisition: A global game approach," Journal of Economic Theory, Elsevier, vol. 210(C).
    2. Ozsoylev, Han N. & Walden, Johan, 2011. "Asset pricing in large information networks," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2252-2280.
    3. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, July.
    4. Sydney C. Ludvigson & Sai Ma & Serena Ng, 2021. "Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 369-410, October.
    5. Rondina, Giacomo & Shim, Myungkyu, 2015. "Financial prices and information acquisition in large Cournot markets," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 769-786.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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