Endogenous Information Flows in Financial Markets


This article studies the flows of new information to understand the price discovery process and the dynamic behavior of uncertainty in financial markets. The model considers the interactions between the firms' incentives to voluntarily disclose privileged information, and the incentives for investors to discover private information. I show that increasing returns in the information discovery function are necessary to generate fluctuation in the dispersion of beliefs. Furthermore, in line with the empirical evidence, the model shows that (i) managers withhold (or delay the release of) bad news, but immediately reveal good news to investors, and (ii) the amount of information traded in the information markets decreases as the state of the economy deteriorates. These results have implications for the dispersion of conditional beliefs and asset prices.

Información adicional

  • Presentador: Federico Filippini
  • Proveniente: Universidad de los Andes, Colombia
  • Fecha: Miércoles, 14 Octubre 2015
  • Hora: 12:00
  • Lugar: Sala 788, FAE