| The first chapter explores how introducing a dynamic feature changes the economics of the disclosure process and overturns the current intuition about the desirability of immediate disclosure. While the manager can improve the trading opportunities of informed speculators by withholding his information, the arbitrage capacity of these speculators is limited by the amount of risk they have to bear. In a dynamic setting, however, we find that immediate disclosure is not always optimal. By delaying disclosure until an intermediate point in time, the firm can offer opportunities for informed trading without exposing speculators to the substantial risks of holding the asset until liquidation. We characterize situations in which it will be optimal to disclose information immediately and situations in which delaying disclosure until an intermediate point in time is preferable.; The second chapter studies information acquisition in a model where both entry of analysts and their optimal information quality is endogenous. We show existence of the Bayesian-Nash equilibrium and solve for it in closed form. In particular, we find that the precision of an individual signal will always be bounded from above by the precision of the prior belief on payoff uncertainty. The model gives a simple, fully rational explanation on why the number of analysts following a stock can be quite large. Endogenizing the cost of information by allowing the manager to choose an optimal informational policy, we find a variety of optima that depend discontinuously on the model parameters. As a consequence, among two similar firms, one may find it optimal to attract many analysts, the other will cooperate with only a few.; The third chapter explores the multiple equilibria typically found in dynamic models of competitive informed trading. Typically, the literature proceeds by studying one equilibrium which is chosen without any further justification. In the setup of Hirshleifer, Subrahmanyam, and Titman (1994) we document how the two equilibria the author find differs. As the number of informed traders goes to zero, the equilibrium the authors study becomes progressively less informative. The other equilibrium, however, displays strikingly counterintuitive behavior. With fewer informed agents present in the market, prices become increasingly informative. In the limit, the stock price fully reflects information that is unavailable to anyone in the economy. While the second case seems counterintuitive, there is no economic reason why one equilibrium should obtain and not the other. |
