Public Information and Risk-Sharing in a Pure-Exchange Economy

68 Pages Posted: 7 Feb 2014 Last revised: 2 Jun 2016

Thomas Andreas Maurer

Washington University in St. Louis - John M. Olin Business School; London School of Economics & Political Science (LSE)

Ngoc-Khanh Tran

Washington University in Saint Louis - John M. Olin Business School

Date Written: February 4, 2014

Abstract

We analyze whether the timing of public information releases affects risk-sharing and pricing in a pure exchange economy. Information releases do not matter if agents have time additive preferences, homogeneous beliefs and access to complete markets. In the case of heterogeneity in agents' beliefs, we are able to show analytically that early information releases are Pareto improving but pricing is essentially unaffected. In the case of recursive preferences we provide numerical results suggesting that early information releases improve risk-sharing, and if the EIS is large enough, they have a negative effect on the ex-ante equity premium.

Keywords: information, welfare, risk sharing, timing of uncertainty resolution, asset pricing, general equilibrium

JEL Classification: D51, D80, D84, G12

Suggested Citation

Maurer, Thomas Andreas and Tran, Ngoc-Khanh, Public Information and Risk-Sharing in a Pure-Exchange Economy (February 4, 2014). Available at SSRN: https://ssrn.com/abstract=2390929 or http://dx.doi.org/10.2139/ssrn.2390929

Thomas Andreas Maurer (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ngoc-Khanh Tran

Washington University in Saint Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

HOME PAGE: http://www.olin.wustl.edu/EN-US/Faculty-Research/Faculty/Pages/FacultyDetail.aspx?username=ntran

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