The disclosure of information about the range of asset value in market

2025-11-14

AI Summary

This paper investigates the impact of interval-valued asset value disclosures on financial markets. We develop a rational expectations model that jointly incorporates private signals, noise trading, and the location and precision characteristics of interval disclosure. The model analyzes how such disclosures affect price sensitivity to private information, market liquidity, and asset risk premia. Our results show: (1) price responsiveness to private signals declines nonlinearly as the interval midpoint deviates from the private signal—revealing asymmetric sensitivity; (2) interval disclosure significantly reduces price volatility and enhances market liquidity; and (3) by endogenously adjusting the interval midpoint, regulators can steer the equilibrium asset premium, offering a novel informational intervention tool. This study is the first to systematically characterize the nonlinear governance effects of interval information within signal structures, thereby extending market microstructure theory under incomplete information.

Technology Category

• Game Theory and Economic Paradigms: Imperfect Information
• Search and Optimization: Mixed Discrete/Continuous Search
• Reasoning under Uncertainty: Stochastic Optimization

Application Category

• Economics, Online Markets and Human Computation: Advertising auctions, pricing, markets, and exchanges
• Security and Privacy: Data transparency and provenance
• Semantics and Knowledge: Methods to enhance, augment, integrate or synergize semantic models such as knowledge graphs and LLMs

Abstract

The information released to investors in financial markets has various forms. We refer to range information as information about the upper and lower bound which the payoff of a risky asset may reach in the future. This study develops rational expectation models to explore the market impacts of disclosure of range information. Our model shows that its disclosure can decrease the sensitivity of market price to private signal and increase market liquidity. The market impact of its disclosure depends on the position and precision of the disclosed range. When the linear combination of private signal and noise trading volume is distant from the disclosed range, the reaction of price to a variation in private signal will almost vanish, whereas a movement of the disclosed range can affect the price efficiently. If the midpoint of the disclosed range is higher (lower) than a criterion which is specified in this study, the disclosure will reduce (raise) asset premium.

Problem

• Modeling market impacts of disclosing asset value range information
• Analyzing how range disclosure affects price sensitivity and liquidity
• Examining how range position and precision influence asset premium

Innovation

• Develops rational expectation models for range information
• Disclosure reduces price sensitivity to private signals
• Market impact depends on range position and precision