Efficient market hypothesis: an experimental study with uncertainty and asymmetric information

Mondher Bouattour () and Isabelle Martinez ()
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Mondher Bouattour: CERIIM & LGCO Université de Toulouse 3 Paul Sabatier
Isabelle Martinez: TSM Research - UMR 5303 CNRS Université de Toulouse 1 Capitole Université de Toulouse 3 Paul Sabatier

Revue Finance Contrôle Stratégie, 2019, vol. 22, issue 4, 27-51

Abstract: The efficient market hypothesis has been the subject of a wide debate over the past decades. This paper investigates the market efficiency by using laboratory experiments. We ran three experimental treatments with two distinguishing dimensions: uncertainty and asymmetric information. Results show that both uncertainty and information asymmetry affect the level of market efficiency with information asymmetry having a pronounced impact. Market efficiency is reduced when the fundamental value of stocks is volatile. In addition, we find that participants under-react to information and that this under-reaction is not corrected during trading periods and prices remain stable. Classification-JEL:C92;D82;G12;G14

Keywords: market efficiency; uncertainty; asymmetric information; underreaction; laboratory experiments (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:dij:revfcs:v:22:y:2019:i:4:p:27-51

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