DP8680 Endogenous Information Flows and the Clustering of Announcements
|Author(s):||Viral V. Acharya, Peter DeMarzo, Ilan Kremer|
|Publication Date:||December 2011|
|Keyword(s):||disclosure dynamics, disclosure timing, disclosure,, earnings announcement, skewness, stochastic volatility, strategic disclosure|
|JEL(s):||D82, G14, G30, M41, M45|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8680|
We consider the strategic timing of information releases in a dynamic disclosure model. Because investors don?t know whether or when the firm is informed, the firm will not necessarily disclose immediately. We show that bad market news can trigger the immediate release of information by firms. Conversely, good market news slows the release of information by firms. Thus, our model generates clustering of negative announcements. Surprisingly, this result holds only when firms can preemptively disclose their own information prior to the arrival of external information. These results have implications for conditional variance and skewness of stock returns.