Page info: *Author:Mathiesen, H. *Document version:2.5. *Copyright 1997-2019, H. Mathiesen.Legal notice. 


Exhibition: Why tough disclosure laws decrease stock price fluctuations


Introduction: This exhibition presumes understanding of concepts from the exhibition: Why the equilibrium stock price is fluctuating. The point of the present exhibition is to explain why tougher disclosure regulation leads to less fluctuating stock prices. This may hardly surprise anyone's intuitive understanding of the matter, but this figure provides a reason, namely, that a tougher disclosure regime decreases the cost of gathering and analyzing information about fundamental value. The dynamics is roughly this: The government (stock exchange) passes more demanding disclosure laws (rules). This in turn decreases the cost of informed investors who become more able to profit. This attracts other informed investors and as a result the share of informed investors to non-informed investors increases. This in turn decreases the relative stock price fluctuations and as a result of this the extraordinary benefit of being an informed investor fades out. This again stops the influx of informed investors and a new fluctuating equilibrium with less stock price fluctuations has been established. Click the links within and below the figure for more info.


Note: All bold text in figure below can be clicked to obtain more information (Ifyou canít click here).



-Copyright 1997-2019, H. Mathiesen. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.Legal notice.