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In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because the former is more informative about the likely behavior of others. This may lead to welfare-reducing “overreactions” to public signals as shown by Morris and Shin (2002). Recent experiments on games with strategic complementarities show that subjects attach a lower weight to public signals than theoretically predicted. The purpose of this paper is to reconsider the welfare effects of public signals accounting for the weights observed in experiments.

Aggregate behavior observed in experiments on games with strategic complementarities can be explained by a cognitive hierarchy model where subjects employ limited levels of reasoning. They respond in a rational way to the non-strategic part of a game and they account for other players responding rationally, but they neglect that other players also account for others’ rationality. This paper analyzes the welfare effects of public information under such limited levels of reasoning.

In the model by Morris and Shin (2002) public information is always welfare improving if strategies are derived from such low reasoning levels. The optimal degree of publicity is decreasing in the levels of reasoning. For the observed average level of reasoning, full transparency is optimal, if public information is more precise than private information. If the policy maker has instruments that are perfect substitutes to private actions, the government should secretly respond to its information without disclosing or signaling it to the private sector independent of the degree of private agents’ rationality.

This paper takes experimental evidence back to theory and shows that the main result obtained by the theory under rational behavior breaks down if theory accounts for the bounded rationality observed in experiments.

This paper aims to explore how fund managers (FMs) deal with major problems of ignorance and uncertainty in stock selection and in asset allocation decisions.

Interviews were conducted with 40 fund managers in the period October 1997 to January 2000. A seven stage approach was adopted to sift through and process the large volumes of case data. The interview case data formed the basis for identifying common patterns and themes across the cases.

The case data revealed the nature of this private information agenda concerning intellectual capital or intangibles and the dynamic connections between these variables in the value creation process. The case data provided insight into how the book value and market value gap arose and the special role of information on intangibles and intellectual capital in valuing the company.

The fund management behaviour has important implications for regulatory policy issues on insider information, on corporate disclosure, the corporate governance role of financial institutions, and for the governance of financial institutions.

The paper focuses on issues of importance in an increasingly concentrated and global FM industry.

In the internet era, the boundaries between public and private lives of government employees are often blurred, resulting in enhanced concerns about administrative accountability and effectiveness. By adopting a multi-step qualitative methodology involving internet survey and analysis of illustrative examples, this research explores and examines how social media policies could assist in keeping the public and private lives of civil servants distinct. We find that very few public sector agencies have adopted social media policies in an attempt to regulate employee behavior. We conclude that social media sites, both private and official, could be an effective administrative tool if harnessed properly. We offer certain recommendations and strategies based on our findings that could assist in accomplishing the principles of ethical administration.

In the internet era, the boundaries between public and private lives of government employees are often blurred, resulting in enhanced concerns about administrative accountability and effectiveness. By adopting a multi-step qualitative methodology involving internet survey and analysis of illustrative examples, this research explores and examines how social media policies could assist in keeping the public and private lives of civil servants distinct. We find that very few public sector agencies have adopted social media policies in an attempt to regulate employee behavior. We conclude that social media sites, both private and official, could be an effective administrative tool if harnessed properly. We offer certain recommendations and strategies based on our findings that could assist in accomplishing the principles of ethical administration.

In this article, we survey experiments that are directly related to monetary policy and central banking. We argue that experiments can also be used as a tool for central bankers for bench testing policy measures or rules. We distinguish experiments that analyze the reasons for non-neutrality of monetary policy, experiments in which subjects play the role of central bankers, experiments that analyze the role of central bank communication and its implications, experiments on the optimal implementation of monetary policy, and experiments relevant for monetary policy responses to financial crises. Finally, we mention open issues and raise new avenues for future research.

The purpose of this paper is to analyze the impact of public and private information of Tunisian firms on stock liquidity.

The paper uses a sample of 41 Tunisian firms listed in Tunis Stock Exchange for the year 2007. Public information disclosed in annual reports and in web sites is measured by two self‐constructed disclosure indexes. To assess private information the authors use imbalance order flows. The stock liquidity proxy used in the study is Liu's multidimensional measure. Ordinary least squares (OLS) regression is applied to model the relationship between firm's information environment and stock liquidity.

First, the results provide evidence that public and private information are independent. Second, Tunisian investors do not trust the information disclosed in both annual reports and web sites, consequently it has no effect on stock liquidity, in contrast with private information. This result implies that Tunisian investors are overconfident and rely only on their private information.

The paper's findings indicate that Tunisian regulation efforts to enhance corporate transparency are not sufficient. Hence, Tunisian firms need more incentives to disclose more information to investors.

This paper, to the authors’ best knowledge, is the first to investigate the effect of both private and public information on stock liquidity. Moreover, the authors were not limited to annual reports as the only source of public information, as were prior papers, because public information was assessed in both annual reports and corporate web sites.

The purpose of this paper is to empirically analyze the dynamic relationship between stock market and bond market based on the effect of different information shocks.

This paper decomposes the information of stock market and bond market into public information and private information. The characteristics of response of stock market and bond market to the information shocks are examined by SVAR model and modified BEKK model.

The study shows that the information shocks in financial market yield not only the effect on linear asset return but also the effect on nonlinear asset volatility. The public information mainly produces a short effect of return while the private information mainly produces a permanent effect on volume. The interactive relation between stock market and bond market is mainly reliant on the effect of the information shock volatility to market return volatility.

The paper empirically analyzes the influence characteristics of different information shocks, which has some reference value not only for deeply understanding the market microstructure but also for improving the construction of various capital markets.

This chapter contributes to the continuous debate on the effects of public information. The debate initiated with Morris and Shin (2002) who showed that heightening the precision of public information can be detrimental to welfare in a beauty contest framework, because when agents have both private and public information, they may overreact to the public information since it acts as a focal point. If the private agents overreact to public information, then a policy of limited transparency may be warranted. Some researchers suggest partial announcement (limited publicity), others propose to disseminate the public information privately to each agent (limited precision) with some idiosyncratic noise in order to reduce overreaction. Those chapter, however, miss the following fact; they don’t take into account the interaction between private sector and the central bank. We extend those studies by setting the framework as a two-player monetary policy game between the central bank and the private sector by allowing explicitly for a central bank to be one of the many contributors of the public signal. We show (1) how introducing a certain degree of opacity affects both players and determines the conditions under which an intermediate transparent strategy improves the outcome of the private sector, as well as of the central bank. We find that reducing transparency doesn’t affect the two players in the same way. (2) It turns out that respective players’ losses are strictly identical when the central bank implements the optimal degree of transparency or the optimal degree of publicity. We establish then an equivalence relationship in terms of effects between publicity and transparency for both actors.

This chapter addresses the criticisms that escalation of commitment research has focused only on individual (as opposed to team or group) decision-making. It has been suggested that research findings of individual-based decision on managers’ escalation behaviors may not be applicable in today’s business environment which is increasingly dominated by team or group-based decision. Specifically, this chapter examines the effects of information availability (public vs. private information) and type of responsibility (sole and joint responsibility) on managers’ project evaluation decisions. A laboratory experiment was conducted to test the hypotheses developed for this study. The results indicate that, consistent with prior research, project managers exhibited a greater tendency to continue a failing project under private information than public information conditions. In addition, in the private information condition, project managers with joint responsibility for an investment project expressed a greater tendency to continue a failing project than those with sole responsibility. Implications of our results for the design of management control systems are discussed.

The main aim of this paper is to empirically test at market level, the investors' differential reaction to information, contribution of their confidence level and adaptive behaviour to excessive market volatility in Indian stock market.

The Bivariate Vector Autoregression and Impulse Response Analysis are used to study whether investors over/under-react to private and public information. EGARCH models are used to study the contribution of investors' over/under-confidence and adaptive behaviour to excessive market volatility.

The investors over-react to private information and under-react to public information during pre-crash period, become overconfident and contribute to excessive volatility. They under-react to both private and public information during after-crash period, become under-confident and also conform to adaptive market hypothesis (AMH).

The empirical results of the study can help investors to minimize the negative impact of over/under-confidence on their expected utility.

The investors shall perform a post-analysis of investment, become aware of their past behavioural mistakes and start adapting to changing market conditions. This shall move the markets towards a new equilibrium in long run thus conforming AMH. However, the investors sometimes display an apparently irrational behaviour during this process.

To the best of the author's knowledge, this is the first study at market level data examining investors' over/under-reaction, over/under-confidence and adaptive behaviour in the context of stock market crash.