On the microstructure of price determination and information aggregation with sequential and asymmetric information arrival in an experimental asset market

Martin Barner, Francesco Feri and Charles Plott ()

Annals of Finance, 2005, vol. 1, issue 1, 73-107

Abstract: Experiments were conducted on an asset with the structure of an option. The information of any individual is limited, as if only the direction of movement of the option value known for a single period without information of the value from when movement was initiated. However, if all information of all insiders were pooled, the value of the option would be known with certainty. The results are the following: (1) Information becomes aggregated in the prices as if fully informative rational expectations operated; and (2) The mechanism through which information gets into the market is captured by a path dependent process that we term ‘‘The Fundamental Coordination Principle of Information Transfer in Competitive Markets’’. The early contracts tend to be initiated by insiders who tender limit orders. The emergence of bubbles and mirages in the markets are coincident with failures and circumstances that prevent the operation of the ‘‘Fundamental Principle.’‘ Copyright Springer-Verlag Berlin Heidelberg 2005

Keywords: Microstructure; Information; Rational expectations experiments; Information aggregation; Belief formation; Bubbles; Cascades; Mirages; D4; G10; C92; D44; D82 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10436-004-0005-4 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: On the Microstructure of Price Determination and Information Aggregation with Sequential and Asymmetric Information Arrival in an Experimental Asset Market (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:1:y:2005:i:1:p:73-107

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10436/PS2

DOI: 10.1007/s10436-004-0005-4

Access Statistics for this article

Annals of Finance is currently edited by Anne Villamil

More articles in Annals of Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().