Let’s Chat… When Communication Promotes Efficiency in Experimental Asset Markets

Brice Corgnet (), Mark Desantis and David Porter
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Brice Corgnet: EM - EMLyon Business School
Mark Desantis: Chapman University
David Porter: Chapman University

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Abstract: The growing prevalence of stock market chat rooms and social media suggests that communication between traders may affect market outcomes. Using data from a series of laboratory experiments, we study the causal effect of trader communication on market efficiency. We show that communication allows markets to convey private information more effectively. This effect is robust to a wide range of information settings. The presence of insiders limits the impact, whereas posted reputation scores in the communication platform magnify it. These findings illustrate the need to consider social interactions when designing market institutions to leverage the social motives that foster information aggregation.

Keywords: social market design; information aggregation; market efficiency; Communication; experimental asset markets (search for similar items in EconPapers)
Date: 2024-10-01
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Published in Management Science, 2024, 70 (10), pp.6550 - 6568. ⟨10.1287/mnsc.2023.4967⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05721205

DOI: 10.1287/mnsc.2023.4967

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