Disclosure Requirements, the Release of New Information and Market Efficiency: New Insights from Agent-based Models

Authored by Frank Westerhoff, Oliver Hermsen, Bjoern-Christopher Witte

Date Published: 2010-02-19

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

We explore how disclosure requirements that regulate the release of new information may affect the dynamics of financial markets. Our analysis is based on three agent-based financial market models that are able to produce realistic financial market dynamics. We discover that the average deviation between market prices and fundamental values increases if new information is released with a delay, while the average price volatility is virtually unaffected by such regulations. Interestingly, the tails of the distribution of returns become fatter if fundamental data is released less continuously, indicating an increase in financial market risk.

Tags

Market efficiency regulation of financial Markets Agent-based financial market models Monte Carlo analysis disclosure requirements release of new information