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Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51549

Andolfatto, David; Berentsen, Aleksander; Waller, Christopher (2011). Optimal Disclosure Policy and Undue Diligence. Working paper series / Department of Economics No. 45, University of Zurich.

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Abstract

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.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
DDC:330 Economics
JEL Classification:E52, E58, E59
Language:English
Date:November 2011
Deposited On:25 Nov 2011 10:13
Last Modified:17 Oct 2012 07:15
Series Name:Working paper series / Department of Economics
Number of Pages:27
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/wp.html

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