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Uninformative announcements and asset trading behavior

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  • Corgnet, Brice
  • Kujal, Praveen
  • Porter, Dave

Abstract

Financial markets are overwhelmed by daily announcements. We use experimental asset markets to assess the impact of uninformative communications on asset prices and trading volumes. We deliver uninformative messages in standard experimental asset markets and find that trading volumes and prices are impacted by these messages. In particular, the release of a pre-announced preset message to traders “The price is too high” in predetermined trading periods decreases the amplitude and duration of bubbles. Also, the release of the messages “The price is too high” or “The price is too low” reduces trading volume with inexperienced subjects.

Suggested Citation

  • Corgnet, Brice & Kujal, Praveen & Porter, Dave, 2007. "Uninformative announcements and asset trading behavior," UC3M Working papers. Economics we078350, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we078350
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    References listed on IDEAS

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    1. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-859, July.
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    7. Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-1151, September.
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    Cited by:

    1. Stephen Cheung & Stefan Palan, 2012. "Two heads are less bubbly than one: team decision-making in an experimental asset market," Experimental Economics, Springer;Economic Science Association, vol. 15(3), pages 373-397, September.
    2. Palan, Stefan, 2010. "Digital options and efficiency in experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 506-522, September.

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    More about this item

    Keywords

    Experimental asset markets;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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