Professor Jason Shachat jason.shachat@durham.ac.uk
Professor
We report on experimental markets which generate an abject failure of the aggregation of asymmetric information. While realized prices have zero correlation with fundamental values, surprisingly, these are not highly volatile. The non-aggregation of information manifests as prices which lock in to home grown norms that we call informational price cascades. Our results are in stark contrast to previous experiments testing fully revealing rational expectations equilibrium under asymmetric information and others examining social learning in asset markets when there is a rational market maker. Our experiments incorporate the asset and information structures from the latter into the decentralized private information setting and double auction trading mechanism of the former. Information only starts to aggregate when either each private signal is revealed to half of the traders or all private signals are simultaneously released early in the asset's issue.
Shachat, J., & Srinivasan, A. (2022). Informational price cascades and non-aggregation of asymmetric information in experimental asset markets. Journal of Behavioral Finance, 23(4), 388-407. https://doi.org/10.1080/15427560.2022.2081970
Journal Article Type | Article |
---|---|
Acceptance Date | Mar 3, 2022 |
Online Publication Date | Jun 15, 2022 |
Publication Date | 2022 |
Deposit Date | Mar 15, 2022 |
Publicly Available Date | Mar 7, 2023 |
Journal | Journal of Behavioral Finance |
Print ISSN | 1542-7560 |
Electronic ISSN | 1542-7579 |
Publisher | Taylor and Francis Group |
Peer Reviewed | Peer Reviewed |
Volume | 23 |
Issue | 4 |
Pages | 388-407 |
DOI | https://doi.org/10.1080/15427560.2022.2081970 |
Public URL | https://durham-repository.worktribe.com/output/1212018 |
Published Journal Article
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Copyright Statement
© 2022 The Author(s). Published with license by Taylor and Francis Group, LLC
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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