Aggregation and dissemination of information in experimental asset markets in the presence of a manipulator
AbstractWe study with the help of a laboratory experiment the conditions under which an uninformed manipulator - a robot trader that unconditionally buys several shares of a common value asset in the beginning of a trading period and unwinds this position later on - is able to induce higher asset prices. We find that the average contract price is significantly higher in the presence of the manipulator if, and only if, the asset takes the lowest possible value and insiders have perfect information about the true value of the asset. It is also evidenced that the robot trader makes trading gains; i.e., independently on whether the informed traders have perfect or partial information, it earns always more than the average trader. Finally, not only uninformed subjects suffer from the presence of the robot trader, but also some of the imperfectly informed insiders have lower payoffs once the robot trader is added as a market participant.
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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 ws084110.
Date of creation: Sep 2008
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Asset market; Experiment; Price manipulation; Rational expectations;
Other versions of this item:
- Helena Veiga & Marc Vorsatz, 2008. "Aggregation and Dissemination of Information in Experimental Asset Markets in the Presence of a Manipulator," Working Papers 2008-29, FEDEA.
- NEP-ALL-2008-09-29 (All new papers)
- NEP-CTA-2008-09-29 (Contract Theory & Applications)
- NEP-EXP-2008-09-29 (Experimental Economics)
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