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Guarnaschelli, Serena; Kwasnica, Anthony M.; Plott, Charles R.

doi:10.1023/a:1022045923185

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2005

2023

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Cited by 7 publications

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“…Information aggregation is typically tested using double auctions since call markets are known to be an ineffective architecture (Kagel and Levin (1986), Guarnaschelli, Kwasnica, and Plott (2003), Chen and Plott (2008)). We show, indeed, that the information brought by traders in the market is only part of the information possessed.…”

Section: Discussionmentioning

confidence: 99%

Risk aversion and information aggregation in binary‐asset markets

Filippin

Mantovani

2023

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We investigate how risk aversion (RA) shapes the informative content of prices in an experimental asset market, where traders are sorted according to their RA. RA should induce steeper individual demands and, under its most common parametrizations, drive equilibrium prices closer to revealing the state. Results support the prediction on individual demands, but not the prediction on prices, which do not vary with RA and are close to the risk‐neutral benchmark. This purported conflict is due to traders, particularly the more risk‐averse ones, conveying into prices only part of their information.

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