We study real efficiency implications of disclosing public information in a model with multiple dimensions of uncertainty where market prices convey information to real decision makers. Disclosing public information has a positive direct effect of providing new information and an indirect effect of changing price informativeness, whose sign depends on the type of information being disclosed. Paradoxically, when disclosure is about a variable that real decision makers care to learn, the indirect effect is negative. Moreover, in markets which are effective in aggregating private information, the negative indirect effect dominates the direct effect, implying that better disclosure harms real efficiency.
Bio of the speaker:
Liyan Yang is an Associate Professor of Finance at Rotman. He graduated from the department of economics at Cornell University in 2010. His research interests are in financial markets and behavioral finance. His current research focuses on information transmission and production in financial markets and related regulation issues. His work has been published in Journal of Economic Theory, Journal of Finance, Journal of Financial Economics, Management Science, Review of Financial Studies, and many others. He received Bank of Canada’s Governor’s Award (2016), Roger Martin Excellence in Research Award (2015), TCFA Best Paper Awards (2011, 2013), and NFA Best Paper Awards (2011, 2012).