Optimal disclosure policy and undue diligence
While 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.
|Date of creation:||Nov 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Schönberggasse 1, CH-8001 Zürich|
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
More information through EDIRC
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.:
- Makoto Watanabe & Leo Ferraris, 2007.
"Collateral Secured Loans in a Monetary Economy,"
2007 Meeting Papers
121, Society for Economic Dynamics.
- David Andolfatto, 2010.
"On the social cost of transparency in monetary economies,"
2010-001, Federal Reserve Bank of St. Louis.
- 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.
- Aleksander Berentsen & Guillaume Rocheteau, 2004.
"Money and Information,"
Review of Economic Studies,
Oxford University Press, vol. 71(4), pages 915-944.
- Lagos, Ricardo & Rocheteau, Guillaume, 2008.
"Money and capital as competing media of exchange,"
Journal of Economic Theory,
Elsevier, vol. 142(1), pages 247-258, September.
- Gary Gorton, 2009.
"The Subprime Panic,"
European Financial Management,
European Financial Management Association, vol. 15(1), pages 10-46.
- 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, 2004. "The wrong kind of transparency," LSE Research Online Documents on Economics 24712, London School of Economics and Political Science, LSE Library.
- 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," STICERD - Theoretical Economics Paper Series 439, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- 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.
When requesting a correction, please mention this item's handle: RePEc:zur:econwp:045. 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: (Marita Kieser)
If references are entirely missing, you can add them using this form.