Informational Asymmetries in Laboratory Asset Markets with State Dependent Fundamentals

Konferenzbeitrag

We investigate the formation of market prices in a new experimental setting involving multi-period asset markets with state-dependent fundamentals. We are particularly interested in two informational aspects: (1) the role of traders who are informed about the true state and (2) the provision of Bayesian updates of the assets state-dependent fundamental value (BFVs) to all traders. We find that bubbles are a rare phenomenon in all our treatments. Markets with asymmetrically informed traders converge faster toward the fundamentals of the underlying state and exhibit smaller price deviations from fundamentals, suggesting higher efficiency of markets with asymmetrically informed traders. The provision of BFVs has little to no effect. Behavior of informed and uninformed traders differs at the beginning but converges during the course of the markets. On average offers of uninformed traders are lower (higher) than offers of informed traders in the good ( bad ) state resulting in that uninformed traders hold less (more) assets in good ( bad ) state markets compared to informed traders. Informed traders earn superior profits.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Experimental Economics III ; No. C09-V1

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Group Behavior ; General Equilibrium and Disequilibrium: Financial Markets ; Asymmetric and Private Information; Mechanism Design

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Markstädter, Andreas ; Keser, Claudia
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/100359
• Last update: 10.03.2025, 11:44 AM CET