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Information Mirages in Experimental Asset Markets

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Author Info
Camerer, Colin
Weigelt, Keith

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Abstract

One explanation for the apparent volatility of asset prices is that people overreact to trades that are uninformative, creating self-generated information "mirages." The authors test whether mirages occur in experimental asset markets. There are insiders in only half the periods, so traders cannot be sure if the trades of others reveal information. The authors observed four clear mirages in forty-seven periods without insiders. Mirages always occurred early in an experimental session; in later periods, traders learn whether there are insiders by observing nonprice information, such as the speed of trading, and mirages occurred only temporarily. Copyright 1991 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 64 (1991)
Issue (Month): 4 (October)
Pages: 463-93
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Handle: RePEc:ucp:jnlbus:v:64:y:1991:i:4:p:463-93

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  1. Olivier Brandouy & Pascal Barneto & Lawrence Leger, 2003. "Asymmetric information, imitative behaviour and communication: price formation in an experimental asset market," European Journal of Finance, Taylor and Francis Journals, vol. 9(5), pages 393-419, October. [Downloadable!] (restricted)
  2. Noeth, Markus & Camerer, Colin F. & Plott, Charles R. & Webber, Martin, 1999. "Information Aggregation in Experimental Asset Markets: Traps and Misaligned Beliefs," Working Papers 1060, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  3. Markus Noeth & Martin Weber, 2000. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Econometric Society World Congress 2000 Contributed Papers 1592, Econometric Society. [Downloadable!]
  4. Colin F. Camerer, 1998. "Can Asset Markets Be Manipulated? A Field Experiment with Racetrack Betting," Natural Field Experiments 0026, The Field Experiments Website. [Downloadable!]
  5. Sander, Harald & Kleimeier, Stefanie, 2006. "Interest Rate Pass-Through In the Common Monetary Area of the SACU Countries," Research Memoranda 023, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
    Other versions:
  6. Oechssler, Jörg & Schmidt, Carsten & Schnedler, Wendelin, 2009. "Asset Bubbles without Dividends - An Experiment," Working Papers 0439, University of Heidelberg, Department of Economics. [Downloadable!]
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  7. Helena Veiga & Marc Vorsatz, 2008. "The effect of short-selling of the aggregation of information in an experimental asset market," Statistics and Econometrics Working Papers ws083808, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
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  8. Plott, Charles R. & Chen, Kay-Yut, 2002. "Information Aggregation Mechanisms: Concept, Design and Implementation for a Sales Forecasting Problem," Working Papers 1131, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  9. Barner, Martin & Feri, Francesco & Plott, Charles, 2004. "On the Microstructure of Price Determination and Information Aggregation with Sequential and Asymmetric Information Arrival in an Experimental Asset Market," Working Papers 1204, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  10. Markus Noth & Martin Weber, 2003. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Economic Journal, Royal Economic Society, vol. 113(484), pages 166-189, January. [Downloadable!] (restricted)
  11. József Sákovics, 2001. "Games of Incomplete Information Without Common Knowledge Priors," Theory and Decision, Springer, vol. 50(4), pages 347-366, June. [Downloadable!] (restricted)
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  12. Kay-Yut Chen & Leslie R. Fine & Bernardo A. Huberman, 2001. "Forecasting Uncertain Events with Small Groups," Quantitative Finance Papers cond-mat/0108028, arXiv.org. [Downloadable!]
  13. Charles Noussair & Stephane Robin & Bernard Ruffieux, 2001. "Price Bubbles in Laboratory Asset Markets with Constant Fundamental Values," Experimental Economics, Springer, vol. 4(1), pages 87-105, June. [Downloadable!] (restricted)
  14. Helena Veiga & Marc Vorsatz, 2008. "Aggregation and dissemination of information in experimental asset markets in the presence of a manipulator," Statistics and Econometrics Working Papers ws084110, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
  15. Daniel Sgroi, 2003. "The Right Choice at the Right Time: A Herding Experiment in Endogenous Time," Experimental Economics, Springer, vol. 6(2), pages 159-180, October. [Downloadable!] (restricted)
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