Information Diffusion and Momentum in Laboratory Markets

Shengle Lin

Journal of Behavioral Finance, 2015, vol. 16, issue 4, 357-372

Abstract: Theories emphasize the market's capacity of correctly aggregating disperse information so long as the market holds complete information. Recent empirical evidences suggest that the extent of information aggregation also depends upon the dissemination of existing information. In laboratory market, I investigate the market's aggregation capacity in response to the spreading of existing information. The results demonstrate that prices gradually converge to intrinsic value and exhibit momentum in the process of information diffusion. The analysis suggests that aggregation of disperse information is mitigated by the presence of equilibrium multiplicity.

Date: 2015
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DOI: 10.1080/15427560.2015.1095757

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