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Is more information always better? Experimental financial markets with asymmetric information

  • Jürgen Huber
  • Matthias Sutter


  • Michael Kirchler

We study the value of information in financial markets by asking whether having more information always leads to higher returns. We address this question in an experiment where single traders have different information levels about an asset's intrinsic value. In our treatments we vary the nature of the information and the trading mechanism. We find that only the very best informed traders (i.e. insiders) significantly outperform less informed traders. However, there is a wide range of information levels (from zero information to an average information level) where additional information does not yield higher returns. The latter result implies that the value of information is not strictly monotonic.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2005-13.

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Length: 35 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:esi:discus:2005-13
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