The Effect of Short–Selling on the Aggregation of Information in an Experimental Asset Market

Marc Vorsatz and Helena Veiga

No 2008-26, Working Papers from FEDEA

Abstract: 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.

Date: 2008-07
New Economics Papers: this item is included in nep-exp and nep-mst
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Citations: View citations in EconPapers (4)

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Working Paper: The effect of short-selling of the aggregation of information in an experimental asset market (2008)
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