Is more information always better? Experimental financial markets with asymmetric information

Jürgen Huber, Matthias Sutter and Michael Kirchler

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: We study the value of information in financial markets by asking whether having more information always leads to higher returns. We address this question in an experiment where single traders have different information levels about an asset's intrinsic value. In our treatments we vary the nature of the information and the trading mechanism. We find that only the very best informed traders (i.e. insiders) significantly outperform less informed traders. However, there is a wide range of information levels (from zero information to an average information level) where additional information does not yield higher returns. The latter result implies that the value of information is not strictly monotonic.

Keywords: Asymmetric information; Experimental economics; Value of information (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 G1 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-12
New Economics Papers: this item is included in nep-cbe and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
ftp://papers.econ.mpg.de/esi/discussionpapers/2005-13.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server papers.econ.mpg.de: No such host is known.

Related works:
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:esi:discus:2005-13

Ordering information: This working paper can be ordered from
http://www.econ.mpg. ... arch/ESI/discuss.php

Access Statistics for this paper

More papers in Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group Contact information at EDIRC.
Bibliographic data for series maintained by Karin Richter ( this e-mail address is bad, please contact ).