NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Endogenous Information Flows and the Clustering of Announcements

Viral V. Acharya, Peter M. DeMarzo, Ilan Kremer

NBER Working Paper No. 16485
Issued in October 2010
NBER Program(s):   AP   CF

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.

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Document Object Identifier (DOI): 10.3386/w16485

Published: Viral V. Acharya & Peter DeMarzo & Ilan Kremer, 2011. "Endogenous Information Flows and the Clustering of Announcements," American Economic Review, American Economic Association, vol. 101(7), pages 2955-79, December.

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