Efficient market hypothesis: an experimental study with uncertainty and asymmetric information

Mondher Bouattour and Isabelle Martinez
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Mondher Bouattour: Department of Finance, Excelia Business School, La Rochelle, France, LGTO - Laboratoire de Gestion et des Transitions Organisationnelles - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse
Isabelle Martinez: TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse

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Abstract: The efficient market hypothesis has been the subject of a wide debate over the past decades. This paper investigates the market efficiency by using laboratory experiments. We ran three experimental treatments with two distinguishing dimensions: uncertainty and asymmetric information. Results show that both uncertainty and information asymmetry affect the level of market efficiency with information asymmetry having a pronounced impact. Market efficiency is reduced when the fundamental value of stocks is volatile. In addition, we find that participants under-react to information and that this under-reaction is not corrected during trading periods and prices remain stable.

Keywords: Market efficiency; Uncertainty; Asymmetric information; Under‑reaction; Laboratory experiments (search for similar items in EconPapers)
Date: 2019-12-09
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Published in Finance Contrôle Stratégie, 2019, 22-4, ⟨10.4000/fcs.3821⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04725426

DOI: 10.4000/fcs.3821

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