Logo
Munich Personal RePEc Archive

Informational price cascades and non-aggregation of asymmetric information in experimental asset markets

Shachat, Jason and Srivinasan, Anand (2011): Informational price cascades and non-aggregation of asymmetric information in experimental asset markets.

This is the latest version of this item.

[thumbnail of MPRA_paper_30349.pdf]
Preview
PDF
MPRA_paper_30349.pdf

Download (784kB) | Preview

Abstract

We report on experimental markets for a contingent claim asset that eight subjects traded for nine periods before the state was revealed. There is an informative binary signal that arrives after each of the first eight trading rounds. In our baseline treatment the realization of the signal is public information, and in another treatment, market participants are randomly sequenced and receive the signal as private information. In the latter case, we observe zero information aggregation and prices lock in on home grown norms, which we call informational price cascades. We test the fragility of the price cascades in two further treatments. First, we break the monopoly on each signal by revealing it to two subjects, and then we increase that number to four. It is only when we inform four participants, or one-half of the market, that cascades fail to form and information starts to aggregate in the market.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.