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Let’s Chat… When Communication Promotes Efficiency in Experimental Asset Markets

Author

Listed:
  • Brice Corgnet

    (EM - EMLyon Business School)

  • Mark Desantis

    (Chapman University)

  • David Porter

    (Chapman University)

Abstract

The growing prevalence of stock market chat rooms and social media suggests that communication between traders may affect market outcomes. Using data from a series of laboratory experiments, we study the causal effect of trader communication on market efficiency. We show that communication allows markets to convey private information more effectively. This effect is robust to a wide range of information settings. The presence of insiders limits the impact, whereas posted reputation scores in the communication platform magnify it. These findings illustrate the need to consider social interactions when designing market institutions to leverage the social motives that foster information aggregation.

Suggested Citation

  • Brice Corgnet & Mark Desantis & David Porter, 2024. "Let’s Chat… When Communication Promotes Efficiency in Experimental Asset Markets," Post-Print hal-05721205, HAL.
    • Handle: RePEc:hal:journl:hal-05721205
    DOI: 10.1287/mnsc.2023.4967
    as

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