Circuit breakers with uncertainty about the presence of informed agents: I know what you know . . . I think
This study conducts experimental asset markets to examine the effects of circuit breaker rules on market behavior when agents are uncertain about the presence of private information. Our results unequivocally indicate that circuit breakers fail to temper unwarranted price movements in periods without private information. Agents appear to mistakenly infer that others possess private information, causing price to move away from fundamental value. Allocative efficiencies in our markets are high across all regimes. Circuit breakers perform no useful function in our experimental asset markets.
|Date of creation:||2002|
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"Basic Principles of Asset Pricing Theory: Evidence From Large-Scale Experimental Financial Markets,"
1070, California Institute of Technology, Division of the Humanities and Social Sciences.
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Levine's Working Paper Archive
1193, David K. Levine.
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- Ackert, Lucy F. & Church, Bryan & Jayaraman, Narayanan, 2001.
"An experimental study of circuit breakers: The effects of mandated market closures and temporary halts on market behavior,"
Journal of Financial Markets,
Elsevier, vol. 4(2), pages 185-208, April.
- Lucy F. Ackert & Bryan K. Church & Narayanan Jayaraman, 1999. "An experimental study of circuit breakers: the effects of mandated market closures and temporary halts on market behavior," Working Paper 99-1, Federal Reserve Bank of Atlanta.
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