Information mirages in experimental asset markets

Camerer, Colin F.; Weigelt, Keith

doi:10.1016/0167-6687(93)91052-v

Cited by 15 publications

(25 citation statements)

References 26 publications

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“…Knowledge of ones own payout schedule is prevalent within the literature and it is common for information concerning others schedules to be nothing more than the knowledge that they may differ, thus resulting in an endogenous uncertainty as to what the price of an asset should be. This is the case in, amongst others, Friedman, Harrison and Salmon (1984), Plott and Sunder (1988), Camerer and Weigelt (1991). Copeland and Friedman (1991) and O'Brien and Srivastava (1991).…”

Section: Dividendsmentioning

confidence: 84%

“…Smith, Suchanek and Williams (1988) supply evidence that increased experience results in the tendency for expectations and prices to converge to intrinsic values, but deviations still existed. Camerer and Weigelt (1991) furnish evidence that allocative efficiency is improved as experience is gained and FRE becomes better than PI in later periods. In studying the way in which individuals make inferences from public information, McKeIvey and Page (1990) demonstrate that experienced subjects have a higher relative efficiency than inexperienced ones, suggesting an improvement in inference through learning.…”

Section: Periodsmentioning

confidence: 93%

“…Profit: It may be the case that in certain states, given the parameters incorporated in the experimental design, the models under analysis render identical price predictions. This is the case with the PI and FRE models when the G (good) state occurs in Camerer and Weigelt (1991), to overcome this a 'novel' profitability test is formulated. When the G state occurred the two models predicted different trading behaviour for uninformed traders with the highest dividend given the state.…”

Section: Eficiencymentioning

confidence: 99%

“…Plott and Sunder (1982) suggest that experience may result in the possible existence of a learning curve effect. To allow for this possibility Camerer and Weigelt (1991) divided the set of periods of each state type into two subperiods, 'early' and 'late'. Findings suggested that prices converged to FRE predictions in the later subperiods but approximate PI predictions in the earlier subperiods, supporting the view that experience provides traders with the ability to learn.…”

Section: Periodsmentioning

confidence: 99%

“…The first paper to directly address the existence of information mirages was that by Camerer and Weigelt (1991), the design of which was very similar to Plott and Sunder (1982) except that before each period commenced a coin toss determined whether there would be any insiders in that period or not. Regardless of the existence of insiders everyone received a clue card and if there were no insiders that period then all cards were blank, therefore, nobody was able to infer when there were insiders.…”

Section: Miragesmentioning

confidence: 99%

See 4 more Smart Citations

Experimental Asset Markets Within Finance

Duxbury

1995

Journal of Economic Surveys

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show abstract

Section: Dividendsmentioning

confidence: 84%

Section: Periodsmentioning

confidence: 93%

Section: Eficiencymentioning

confidence: 99%

Section: Periodsmentioning

confidence: 99%

Section: Miragesmentioning

confidence: 99%

See 3 more Smart Citations

Experimental Asset Markets Within Finance

Duxbury

1995

Journal of Economic Surveys

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Herding by attribution of privileged information

Quiamzade

L’Huillier

2008

Behavioral Decision Making

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We study a situation where agents take extreme actions and how these actions are imitated by others. First, Experiment 1 showed that an expert first mover had an advantage in obtaining herding by others on his investment decision, when compared to a non-expert first mover. Experiment 2 showed that this advantage only appeared when the first mover's investment was out-of-the-ordinary (in fact, highly aberrant). We obtained the same level of herding in Experiment 3 when the first mover had privileged information, instead of being an expert. Second, Experiment 4 showed that when people observed the same out-of-the-ordinary investment and did not know whether the first mover had privileged information or not, they herded on him as if he had privileged information. In fact, our data revealed that participants thought that the unknown first mover had privileged information. Furthermore, herding was statistically indistinguishable from the condition where observers knew unambiguously that the first mover had privileged information.

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Private but not social information validity modulates social conformity bias

Tam

2019

Human Brain Mapping

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It is well established that human behaviors are susceptible to others' opinions. However, optimal decision theory mandates choices be made upon the estimated validities of different information sources and little is known about whether and how people could wean themselves off social conformity bias, especially when the social signals are uninformative. Here, we asked subjects to participate in a probabilistic urn guessing task based on their private information as well as observed choices from their partners. Specifically, we manipulated the information validity of these two sources such that only the private evidence was informative. Across trials, social conformity declined, manifested by the increased influence of the private evidence but steady effect of social information. Correspondingly, we found dorsomedial prefrontal cortex (dmPFC) was involved in detecting the conflict of private and social information and conforming to social signal whereas striatum was responsible for selectively updating the influence of private (but not social) evidence contingent on its inferred validity. Furthermore, functional coupling between striatum and dmPFC predicted the resistance toward the influence of social information. Together, these results may provide a mechanistic account of how the conformity bias toward uninformative social information can be remedied.

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Information mirages in experimental asset markets

Cited by 15 publications

References 26 publications

Experimental Asset Markets Within Finance

Experimental Asset Markets Within Finance

Herding by attribution of privileged information

Private but not social information validity modulates social conformity bias

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