How Market Prices React to Information: Evidence from Binary Options Markets

Romain Gauriot and Lionel Page

The Economic Journal, 2026, vol. 136, issue 673, 163-183

Abstract: Using a natural experiment setting in binary options markets, we compare the evolution of market prices in situations where the occurrence of public information shocks is contingent on knife-edge conditions and can be considered nearly random. We find that prices mostly react efficiently and quickly to information shocks, adjusting to the new fundamental value. Nonetheless, we observe a tendency for prices to initially under-react when the information shocks are large. This under-reaction is short-lived.

Date: 2026
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