Price-conveyed Information versus Observed Insider Behavior: A Note on Rational Expectations Convergence

Banks, Jeffrey S.

doi:10.1086/261333

Cited by 27 publications

(14 citation statements)

References 2 publications

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“…We did not make the same traders insiders every period, as in some experiments (e.g., Plott and Sunder 1982), because insiders could then deduce whether there were any insiders from their own lack of information. Also Banks (1985) observed that information is fully revealed even when different subjects are insiders each period. Copeland and Friedman 1987a, 1987b, 1991), but we note one example.…”

Section: A Earningsmentioning

confidence: 93%

Information mirages in experimental asset markets

Camerer

Weigelt

1993

Insurance: Mathematics and Economics

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Section: A Earningsmentioning

confidence: 93%

Information mirages in experimental asset markets

Camerer

Weigelt

1993

Insurance: Mathematics and Economics

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“…For example, Copeland and Friedman's (1987) experimental design incorporates a constant period duration of 5 min, as does Sunder (1992), whereas studies by Forsythe et al (1984) and Banks (1985) invoke period lengths of 7 min. In many of the studies the time remaining in a trading period has been information readily available to traders via computer screens.…”

Section: Related Literaturementioning

confidence: 99%

“…adapted by Banks (1985) and further developed by Sunder (1992). The novel feature of this experimental design is the introduction of trading periods with variable durations.…”

Section: Related Literaturementioning

confidence: 99%

Experimental evidence on trading behavior, market efficiency and price formation in double auctions with unknown trading duration

Duxbury

2005

Manage Decis Econ

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The reasons for the highly efficient market outcomes observed under the double auction remain unclear. This paper presents a series of experimental financial markets designed to investigate the importance of unknown trading period duration on trading behavior and the convergence tendencies of such markets. Using panel data techniques the results support the conclusions that individuals generally display more aggressive trading strategies, trading earlier in a period, and that markets exhibit reduced levels of informational efficiency when unknown duration is present. Markets with imperfect information structures are also studied and, in a unique result, are associated with significantly slower rates of trade, as traders become more cautious over their trading strategies. Investigation of the price formation process provides evidence that the pricing error varies over time and the estimation of a fixed effects model provides unique support that learning effects and unknown trading period duration influence the price formation process. Future refinement of theoretical models of the price formation process or institutions of exchange should recognize the effect of unknown trading period duration on market behavior, along with potential learning effects. Copyright © 2005 John Wiley & Sons, Ltd.

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“…Grossman andStiglitz (1976 and1980) provide a theoretical basis that suggests that equilibrium asset prices aggregate and reveal private information. Experimental research shows that when a subset of agents is known to be informed, asset prices reflect private information about asset value (Plott and Sunder (1982), Banks (1985), Sunder (1992), and Ackert, Church, and Shehata (1997)). But little research has examined market behavior when the presence of private information is uncertain.…”

Section: Frameworkmentioning

confidence: 99%