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On the Benefit of Additional Information in Markets with Heterogeneously Informed Agents — an Experimental Study

In: Nonlinear Dynamics and Heterogeneous Interacting Agents

Author

Listed:
  • Jürgen Huber

    (Universität Innsbruck)

  • Michael Kirchler

    (University of Innsbruck)

  • Matthias Sutter

    (Max Planck Institute for Research into Economic Systems)

Abstract

Summary We examine stock market traders' marginal benefits of additional information on the intrinsic value of a stock market security. We use the method of experimental economics to control carefully for the degree of traders' information. Contrary to conventional wisdom we find that it is possible that a marginal unit of additional information does not lead to a marginal increase for a trader's profits. Relatively poorly informed traders can even lose money by using their (limited) available information. However, well informed traders benefit significantly from more information and from using their information when trading.

Suggested Citation

  • Jürgen Huber & Michael Kirchler & Matthias Sutter, 2005. "On the Benefit of Additional Information in Markets with Heterogeneously Informed Agents — an Experimental Study," Lecture Notes in Economics and Mathematical Systems, in: Thomas Lux & Eleni Samanidou & Stefan Reitz (ed.), Nonlinear Dynamics and Heterogeneous Interacting Agents, pages 41-52, Springer.
    • Handle: RePEc:spr:lnechp:978-3-540-27296-0_4
    DOI: 10.1007/3-540-27296-8_4
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    Citations

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    Cited by:

    1. Robert Merl, 2021. "Literature Review of Experimental Asset Markets with Insiders," Working Paper Series, Social and Economic Sciences 2021-04, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    2. Merl, Robert, 2022. "Literature review of experimental asset markets with insiders," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).

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