The effect of short-selling of the aggregation of information in an experimental asset market
We 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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- Plott, Charles R & Sunder, Shyam, 1982.
"Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models,"
Journal of Political Economy,
University of Chicago Press, vol. 90(4), pages 663-698, August.
- Plott, Charles R. & Sunder, Shyam., "undated". "Efficiency of Experimental Security Markets with Insider Information: An Application of Rational Expectations Models," Working Papers 331, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Camerer, Colin & Weigelt, Keith, 1991. "Information Mirages in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 64(4), pages 463-493, October.
- Forsythe, Robert & Palfrey, Thomas R & Plott, Charles R, 1982. "Asset Valuation in an Experimental Market," Econometrica, Econometric Society, vol. 50(3), pages 537-567, May.
- Forsythe, Robert & Palfrey, Thomas R. & Plott, Charles R., "undated". "Asset Valuation in an Experimental Market," Working Papers 299, California Institute of Technology, Division of the Humanities and Social Sciences.
- Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June. Full references (including those not matched with items on IDEAS)
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