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The Distribution of Information and the Price Efficiency of Markets

Brice Corgnet (), Mark Desantis and David Porter

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Abstract: Apparently contradictory evidence has accumulated regarding the extent to which financial markets are informationally efficient. Shedding new light on this old debate, we show that differences in the distribution of private information may explain why informational efficiency can vary greatly across markets. We find that markets are informationally efficient when complete information is concentrated in the hands of competing insiders whereas they are less efficient when private information is dispersed across traders. A learning model helps to illustrate why inferring others' private information from prices takes more time when information is more dispersed.

Keywords: Cognitive finance; Learning models; Experimental asset markets; Market efficiency; Information aggregation; Information dispersion (search for similar items in EconPapers)
Date: 2019-02-15
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02312304
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Published in Journal of Economic Dynamics and Control, 2019

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Journal Article: The distribution of information and the price efficiency of markets (2020) Downloads
Working Paper: The distribution of information and the price efficiency of markets (2019)
Working Paper: The Distribution of Information and the Price Efficiency of Markets (2018) Downloads
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