Why Do Large Investors Disclose Their Information?

58 Pages Posted: 21 Nov 2017 Last revised: 15 Mar 2018

See all articles by Ying Liu

Ying Liu

World Federation of Exchanges

Date Written: November 7, 2017

Abstract

Large investors often advertise private information at private talks or in the media. To analyse the incentives for information disclosure, I develop a two-period Kyle (1985) type model in which an informed short-horizon investor strategically discloses private information to enhance price efficiency. I show that information disclosure is optimal when the scope of private information is large and when the large investor has a high reputation. Short investment horizons induce information disclosure among investors and are beneficial for price efficiency. However, strategic information disclosure reduces trading before disclosure and harms price discovery.

Keywords: Information Disclosure, Price Discovery, Asymmetric Information, Market Microstructure

JEL Classification: G12, G14

Suggested Citation

Liu, Ying, Why Do Large Investors Disclose Their Information? (November 7, 2017). Swiss Finance Institute Research Paper No. 18-17, Available at SSRN: https://ssrn.com/abstract=3073907 or http://dx.doi.org/10.2139/ssrn.3073907

Ying Liu (Contact Author)

World Federation of Exchanges ( email )

125 Old Broad Street
London, EC2N 1AR
United Kingdom

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