Trading in U.S. equity markets is fast and cheap. While proponents of ending quarterly reporting point to the dangers of short-termism, less frequent disclosure is also likely to lead to a decline in liquidity and to greater trading costs. The SEC should carefully consider the effect of increasing asymmetry on the flow of investment capital in secondary markets.
For decades, economists have pointed out that asymmetric information inhibits trade, beginning with George Akerlof’s famous observation that nobody will buy used cars if there is a high enough chance that some are lemons. In modern financial markets, the risk of … Read more