Public Information and Risk-Sharing in a Pure-Exchange Economy
68 Pages Posted: 7 Feb 2014 Last revised: 2 Jun 2016
Date Written: February 4, 2014
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: Suggested Citation