Please use this identifier to cite or link to this item:
http://hdl.handle.net/10125/70550
Information Design in Financial Markets
File | Size | Format | ||
---|---|---|---|---|
HARC-2021 paper 170.pdf | 573.36 kB | Adobe PDF | View/Open |
Item Summary
Title: | Information Design in Financial Markets |
Authors: | Ivan Marinovic |
Keywords: | Bayesian Persuasion Market Microstructure Short Selling |
Date Issued: | 16 Aug 2020 |
Abstract: | We study the optimal disclosure policy of a firm that wishes to maximize its expected stock price in the classic setting in which its stock is traded by risk-averse investors and noise traders. We find that the optimal disclosure policy is imprecise and leads to skewed posterior beliefs. This policy subjects short positions to tail risk, causing investors to demand a large increase in price to absorb noise-trader purchases and leading to overvaluation. Our results suggest that when firms have flexibility in their disclosure choice, disclosure need not improve price efficiency nor enhance liquidity. |
URI: | http://hdl.handle.net/10125/70550 |
Appears in Collections: |
17 Theory |
Please email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.
Items in ScholarSpace are protected by copyright, with all rights reserved, unless otherwise indicated.