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| Author: | Alles, M. Lundholm, R. |
| Title: | On the optimality of public signals in the presence of private information |
| Journal: | Accounting Review
1993 : JAN, VOL. 68:1, p. 93-112 |
| Index terms: | PRIVACY INFORMATION PUBLICITY |
| Language: | eng |
| Abstract: | In this article the authors present three different models designed to elucidate how the disclosure of public information can enhance the welfare of traders in a financial market when some or all traders also have access to costly private information. The authors begin their investigation by revising the work of Diamond (1985). They analyze the underlying cause of Diamond's result and its robustness to changes in the economy. The analysis shows that if the private signals have perfectly correlated errors, the amount of public signal precision necessary to eliminate private information acquisition creates too much signal risk for traders with large endowments of the risky asset. |
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