How Much Information Is Incorporated into Financial Asset Prices? Experimental Evidence

Lionel Page and Christoph Siemroth

The Review of Financial Studies, 2021, vol. 34, issue 9, 4412-4449

Abstract: We investigate the informational content of prices in financial asset markets. To do so, we use a large number of market experiments in which the amount of information held by traders is precisely observed. We derive a new method to estimate how much of this information is incorporated into market prices. We find that public information is almost completely reflected in prices but that surprisingly little private information—less than 50%—is incorporated into prices. Our estimates therefore suggest that, while semistrong informational efficiency is consistent with the data, financial market prices may be very far from strong-form efficiency.

JEL-codes: C92 D82 D84 G14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (15)

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