Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published July 2000 | Published
Journal Article Open

Markets as Information Gathering Tools

Abstract

The academic literature, Wall Street commentary, and even daily news reporting reflect a belief that markets can anticipate events. The current movements in the stock market are interpreted as reflecting the likelihood that the Federal Reserve System will change interest rates. Futures markets are interpreted as reflecting the best estimates of things to come. Movements in individual stock prices are thought to anticipate earnings reports or the probability of a merger or buyout. If we want to know about future weather in the South, we should study the orange juice futures. The academic journals are filled with the concept of rational expectations in which current prices are supposed to reflect the sum of all knowledge in the system. Prices, according to this theory, are a statistic that indicates the aggregation of information about underlying states of the economy. Those who are "outsiders" to the information in the system become "insiders" by simply observing the economic activity.

Additional Information

© 2000 Southern Economic Association. Professor Charles R. Plott presented the Distinguished Guest Lecture at the 1999 Annual Meeting of the Southern Economic Association in New Orleans, Louisiana. He earned his B.S. and M.S. degrees at Oklahoma State University and his Ph.D. at the University of Virginia. He is a Fellow of the American Academy of Arts and Sciences and of the Econometric Society and holds honorary degrees from Universite Pierre Mendès (France) and Purdue University. The financial support of the National Science Foundation and the supporters of the Caltech Laboratory for Economics and Political Science are gratefully acknowledged. Comments and contributions from Kay-Yut Chen have been important for the development of much of the material.

Attached Files

Published - Markets_as_Information_Gathering_Tools.pdf

Files

Markets_as_Information_Gathering_Tools.pdf
Files (1.5 MB)
Name Size Download all
md5:b6ef56f8904bc10de7d60a6121f274e4
1.5 MB Preview Download

Additional details

Created:
August 19, 2023
Modified:
March 5, 2024