Market efficiency, trading institutions and information mirages: evidence from a laboratory asset market

The study at hand investigates the performance of a continuous double auction, and a call market mechanism in an experimental asset market where the presence of insiders is neither certain nor common knowledge. Inspired by Plott and Sunder (J Political Econ 90(4):663–698, 1982) and Camerer and Weigelt (J Bus 64(4):463–493, 1991), we test whether a discrete time mechanism of trading, like the call market, is able to prevent the occurrence of information mirages and to promote higher informational efficiency both in periods with and without insiders. We find that information mirages are widespread and equally likely to occur in the two trading mechanisms. Moreover, our results clearly show that call markets are as informationally efficient as double auction markets both in periods without and with inside information, thus allowing for equal profit sharing between insiders and non-insiders in the latter case. The only appreciable advantage of call markets is a significant reduction of price volatility when no inside information has entered the market, thus stabilizing prices in moments of high uncertainty.