Endogenous Information Flows and the Clustering of Announcements

36 Pages Posted: 25 Oct 2010 Last revised: 19 Jul 2023

See all articles by Viral V. Acharya

Viral V. Acharya

New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Peter M. DeMarzo

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Ilan Kremer

University of Warwick; Hebrew University of Jerusalem

Multiple version iconThere are 5 versions of this paper

Date Written: October 2010

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

Acharya, Viral V. and Acharya, Viral V. and DeMarzo, Peter M. and Kremer, Ilan and Kremer, Ilan, Endogenous Information Flows and the Clustering of Announcements (October 2010). NBER Working Paper No. w16485, Available at SSRN: https://ssrn.com/abstract=1696397

Viral V. Acharya (Contact Author)

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