The effect of short-selling of the aggregation of information in an experimental asset market
AbstractWe show by means of a laboratory experiment that the relaxation of short--selling constraints causes the price of both an overvalued and an undervalued asset to decrease. Hence, the aggregation of information by the market price becomes better in case the asset is overvalued but worse if the asset is undervalued. With respect to payoffs, we find that not only uninformed but also some of the imperfectly informed traders suffer from the weakening of short--selling constraints.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws083808.
Date of creation: Jul 2008
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Asset market; Rational expectations; Experiment; Short Sales;
Other versions of this item:
- Marc Vorsatz & Helena Veiga, 2008. "The Effect of Short–Selling on the Aggregation of Information in an Experimental Asset Market," Working Papers 2008-26, FEDEA.
- NEP-ALL-2008-07-30 (All new papers)
- NEP-EXP-2008-07-30 (Experimental Economics)
- NEP-MST-2008-07-30 (Market Microstructure)
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