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Endogenous Information Flows and the Clustering of Announcements

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  • DeMarzo, Peter
  • Acharya, Viral
  • Kremer, Ilan

Abstract

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.

Suggested Citation

  • DeMarzo, Peter & Acharya, Viral & Kremer, Ilan, 2011. "Endogenous Information Flows and the Clustering of Announcements," CEPR Discussion Papers 8680, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8680
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    More about this item

    Keywords

    Disclosure; Disclosure dynamics; Strategic disclosure; Disclosure timing; Earnings announcement; stochastic volatility; Skewness;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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