Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models
- Creators
-
Plott, Charles R.
- Sunder, Shyam
Abstract
The study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one-priced security. Returns to the security depended upon a randomly drawn state of nature. Some agents (insiders), whose identity was unknown to other agents, knew the state before the markets opened. With replication of market conditions, the predictions of a fully revealing rational-expectations model are relatively accurate. Prices adjusted immediately to near rational-expectations prices; profits of insiders were virtually indistinguishable from non-insiders; and efficiency levels converged to near 100 percent.
Additional Information
© 1982 by The University of Chicago. The financial support of the National Science Foundation, Coopers and Lybrand Foundation, and the Caltech Program for Enterprise and Public Policy is gratefully acknowledged. We have benefited from many conversations with Robert Forsythe and James Jordan. We would also like to thank Stanley Reiter whose comments led to experiment 5.Attached Files
Published - Efficiency_of_experimental_security_markets_with_insider_information.pdf
Files
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Additional details
- Eprint ID
- 43103
- Resolver ID
- CaltechAUTHORS:20131219-120820624
- NSF
- Coopers and Lybrand Foundation
- Caltech Program for Enterprise and Public Policy
- Created
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2013-12-20Created from EPrint's datestamp field
- Updated
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2021-11-10Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Other Numbering System Name
- Social Science Working Paper
- Other Numbering System Identifier
- 331