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.