On the Benefit of Additional Information in Markets with Heterogeneously Informed Agents — an Experimental Study

Jürgen Huber, Michael Kirchler and Matthias Sutter
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Jürgen Huber: Universität Innsbruck
Michael Kirchler: University of Innsbruck

A chapter in Nonlinear Dynamics and Heterogeneous Interacting Agents, 2005, pp 41-52 from Springer

Abstract: Summary We examine stock market traders' marginal benefits of additional information on the intrinsic value of a stock market security. We use the method of experimental economics to control carefully for the degree of traders' information. Contrary to conventional wisdom we find that it is possible that a marginal unit of additional information does not lead to a marginal increase for a trader's profits. Relatively poorly informed traders can even lose money by using their (limited) available information. However, well informed traders benefit significantly from more information and from using their information when trading.

Keywords: Market Price; Marginal Benefit; Information Level; Informed Trader; Efficient Market Hypothesis (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-540-27296-0_4

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DOI: 10.1007/3-540-27296-8_4

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