The Effect of Short–Selling on 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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Veiga, Helena & Vorsatz, Marc, 2009.
"Price manipulation in an experimental asset market,"
European Economic Review,
Elsevier, vol. 53(3), pages 327-342, April.
- Veiga Helena & Vorsatz Marc, 2006. "Price Manipulation in an Experimental Asset Market," Research Memorandum 024, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-68, September.
- Sunder, S., 1989.
"Market For Information: Experimental Evidence,"
GSIA Working Papers
88-89-53, Carnegie Mellon University, Tepper School of Business.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
- 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.
- Plott, Charles R. & Sunder, Shyam., .
"Efficiency of Experimental Security Markets with Insider Information: An Application of Rational Expectations Models,"
331, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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 663-98, August.
- Forsythe, Robert & Palfrey, Thomas R & Plott, Charles R, 1982.
"Asset Valuation in an Experimental Market,"
Econometric Society, vol. 50(3), pages 537-67, May.
- Camerer, Colin & Weigelt, Keith, 1991. "Information Mirages in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 64(4), pages 463-93, October.
When requesting a correction, please mention this item's handle: RePEc:fda:fdaddt:2008-26. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmen Arias)
If references are entirely missing, you can add them using this form.