The Hirshleifer Effect in a Dynamic Setting

59 Pages Posted: 20 Apr 2015 Last revised: 2 Aug 2018

See all articles by Thomas Andreas Maurer

Thomas Andreas Maurer

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

Ngoc-Khanh Tran

Finance Dept., Pamplin College of Business, Virginia Tech; Olin Business School- Washington University in St. Louis

Date Written: July 24, 2018

Abstract

We characterize a prominent tradeoff in the timing of public information releases in dynamic competitive economies populated by heterogeneous agents. While early information releases improve the consumption smoothing, they also reduce risk sharing incentives ex-ante. When either financial markets are under-developed to reap risk sharing potentials, or agents perceive large consumption smoothing benefits, early information releases are universally desirable to all agents, and vice versa. We analytically establish sufficient conditions to quantify these intuitions, and shed new light on the Hirshleifer effect of the information-based welfare reduction from a broader economic perspective incorporating intertemporal dynamics, market availability and heterogeneous agents.

Keywords: Hirshleifer Effect, Disagreement, Welfare Value of Information, Incomplete Markets

JEL Classification: D80, G14, D51

Suggested Citation

Maurer, Thomas Andreas and Tran, Ngoc-Khanh, The Hirshleifer Effect in a Dynamic Setting (July 24, 2018). Available at SSRN: https://ssrn.com/abstract=2596309 or http://dx.doi.org/10.2139/ssrn.2596309

Thomas Andreas Maurer

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
Hong Kong

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 (Contact Author)

Finance Dept., Pamplin College of Business, Virginia Tech ( email )

1016 Pamplin Hall (0221)
Blacksburg, VA 24060-0221
United States

HOME PAGE: http://https://www.nktran.com/

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

One Brookings Dr, Campus Box 1133
St. Louis, MO 63130
United States

HOME PAGE: http://https://www.nktran.com/

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