Reaction to Public Information in Markets: How Much Does Ambiguity Matter?
AbstractIn real world situations the fundamental value of an asset is ambiguous. Recent theory has incorporated ambiguity in the dividend process and the information observed by investors, and studied its effect on asset prices. In this paper we experimentally study trader reaction to ambiguity when dividend information is revealed sequentially. Price changes are consistent with news revelation regarding the dividend regardless of subject experience and the degree of ambiguity. Further, there is no under or over price reactions to news. Regardless of experience, market reaction to news moves in line with fundamentals. Also, no significant differences are observed in the control versus ambiguity treatments regarding prices, price volatility and volumes for experienced subjects. Our results indicate that the role of ambiguity aversion in explaining financial anomalies is limited.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 11-01.
Length: 54 pages
Date of creation: 2011
Date of revision:
Ambiguity; Dividend Revelation; Price Changes; Reaction to News; Experience;
Other versions of this item:
- Brice Corgnet & Praveen Kujal & David Porter, 2013. "Reaction to Public Information in Markets: How much does Ambiguity Matter?," Economic Journal, Royal Economic Society, vol. 123(569), pages 699-737, 06.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-05 (All new papers)
- NEP-EXP-2011-03-05 (Experimental Economics)
- NEP-UPT-2011-03-05 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kip Smith & John Dickhaut & Kevin McCabe & José V. Pardo, 2002. "Neuronal Substrates for Choice Under Ambiguity, Risk, Gains, and Losses," Management Science, INFORMS, vol. 48(6), pages 711-718, June.
- Noussair, C.N. & Tucker, S., 2013.
"Experimental Research On Asset Pricing,"
2013-020, Tilburg University, Center for Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Megan Luetje).
If references are entirely missing, you can add them using this form.