Benchmarking information aggregation in experimental markets

Theoretical and experimental literature have provided mixed insights on the ability of financial markets to perfectly aggregate private information into asset prices. We conduct an experiment designed to benchmark information aggregation in markets. In our lab experiment, we randomly assign subjects...

Full description

Saved in:
Bibliographic Details
Published inEconomic inquiry Vol. 59; no. 4; pp. 1500 - 1516
Main Authors Albertazzi, Andrea, Mengel, Friederike, Peeters, Ronald
Format Journal Article
LanguageEnglish
Published Huntington Beach Western Economic Association 01.10.2021
Subjects
Economics
Economics and Business
Ekonomi och näringsliv
experiment
information aggregation
Markets
Nationalekonomi
Prices
Samhällsvetenskap
Social Sciences
Online AccessGet full text
ISSN0095-2583
1465-7295
1465-7295
DOI10.1111/ecin.13010

Cover

More Information
Summary:Theoretical and experimental literature have provided mixed insights on the ability of financial markets to perfectly aggregate private information into asset prices. We conduct an experiment designed to benchmark information aggregation in markets. In our lab experiment, we randomly assign subjects to different institutional environments, either a market or a Becker–DeGroot–Marschak mechanism. We find evidence that market interaction is worse for information aggregation. The difference between the two environments is driven by price‐insensitive traders who seem unable to learn from market prices. Price‐sensitive traders, by contrast, learn equally well in both environments.
Bibliography:Correction added on 16 July 2021, after first online publication: Funding information has been included in this version
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
ISSN:0095-2583
1465-7295
1465-7295
DOI:10.1111/ecin.13010