Students are expected to carefully read the papers assigned for each lecture and to be ready to engage in discussion.

We will go over selected papers and one or two illustrative problems during each of the first two mornings. The illustrative problems are intended to highlight the critical economic tensions and insights extracted from the papers. Accordingly, lectures will generally revolve around these problems.

After the morning sessions, there will be periods of time in which students break out and work on problems related to the work presented in the morning. Generally, these problems stem from existing papers in the literature, which build upon the frameworks developed in the papers discussed in the morning session.

The underlying papers are provided for each problem. They may be useful for understanding the motivation for the problems, and perhaps, for working through certain aspects of these problems.


Day One

9:00 AM to 10:30 AM: Some Preliminaries

Reading: Conditional Distributions and Bayesian Updating (Teaching Note)
Equilibrium (Teaching Note)
Negative Exponential Utility (Teaching Note for the Grossman and Stiglitz (1980) paper)

10:45 AM to Noon: Asymmetric Information in Capital Markets – Classic Models

Illustrative Problems
Kyle (1985), Illustrative Model
Grossman and Stiglitz (1980), Illustrative Model

Papers: Kyle, A., “Continuous Auctions and Insider Trading,” Econometrica, 1985. (Focus in the initial part of this paper.)
Grossman and Stiglitz, “On the Impossibility of Information Efficient Markets,” American Economic Review, 1980.


12:15 PM to 3:30 PM: Lunch and Problems

Strategic Information Collection
Problem: What Information Should I Chase?
Paper: Fischer, P. and R. Verrecchia, “Correlated Forecast Errors,” Journal of Accounting Research, 1998.

Endogenous Heuristic Response to Disclosure
Problem: Rational Drift? (Sort of)
Paper: Fischer, P. and R. Verrecchia, “Public Information and Heuristic Trade,” Journal of Accounting and Economics, 1999.


3:30 PM to 5:00 PM: Discussion of Papers/Problems


Day Two

9:00 AM to 11:15 AM: Costly Disclosures in Market Settings

Strategic Mandatory Disclosure
Illustrative Problem: Shooting Yourself in the Foot (or Not?)
Paper: Fischer, P. and R. Verrecchia, “Reporting Bias,” The Accounting Review, 2000.

Strategic Voluntary Disclosure
Illustrative Problem: Unraveling the Unraveling
Papers: Verrecchia, R., “Discretionary Disclosure,” Journal of Accounting and Economics, 1983.
Dye, R., “Disclosure of Nonproprietary Information,” Journal of Accounting Research, 1985.
Jung, W.O. and Y.K. Kwon, ”Disclosure When the Market is Unsure of Information Endowment of Managers,” Journal of Accounting Research, 1989.

11:30 AM to 2:30 PM: Lunch and Problems

Strategic Mandatory Disclosure In the Presence of Forecasts
Problem: Are Forecasts Innocuous?
Paper: Fischer, P. and P. Stocken, “The Effect of Speculation on Earnings Management and Investor Information,” Journal of Accounting Research, 2004.

Heuristic Behavior and Disclosure
Problem: Endogenous Puffing
Papers: Fischer P. and R. Verrecchia, “Disclosure Bias,” Journal of Accounting and Economics, 2004.

2:30 PM to 4:00 PM: Discussion of Papers/Problems

4:00 PM to 5:00 PM: Cheap Talk in Market Settings (continues on Day 3)

Problem: Cheap Talk Illustrative Problem
Papers: Farrell, J. and M. Rabin, “Cheap Talk,” The Journal of Economic Perspectives, 1996.


Day Three

9:00 AM to 10:15 AM: Cheap Talk Application to Accounting

Information Crowding Out
Paper: Fischer, P. and P. Stocken, “Analyst Information and Communication,” working paper, 2009.

10:30 AM to 12:30 PM: Unexplained Disagreement

What if Investors Agree to Disagree?
Paper: Bloomfield, R. and P. Fischer, “Disagreement and the Cost of Capital,” working paper, 2009.