Asymmetric information, imitative behaviour and communication: price formation in an experimental asset marketOlivier Brandouy (), Pascal Barneto and Lawrence A. Leger () European Journal of Finance, 2003, vol. 9, issue 5, pages 393-419 Abstract: The paper describes experimental results from a simulated stock market with manipulation of asymmetric information and communication, including conditions intended to promote imitative behaviour and rumour. Price discovery was inefficient when the presence of insiders was disguised, compared to a homogeneous expectations baseline. When the presence of insiders was revealed observed prices became efficient with respect to bad news but not with respect to good news, possibly suggesting loss-averse behaviour. With free communication there was a decrease in both efficiency and price volatility--insider information was masked by noise. Price formation under these conditions was similar to baseline, but with weak evidence of speculative pricing. It is conjectured that other factors than informational noise may be necessary determinants of herd behaviour, but further work is indicated. Keywords: Experimental Markets; Limitation; Rumour; Asymmetric Information (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:taf:eurjfi:v:9:y:2003:i:5:p:393-419 Ordering information: This journal article can be ordered from Access Statistics for this article European Journal of Finance is edited by Chris Adcock More articles in European Journal of Finance from Taylor and Francis Journals |
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