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When Do Security Markets Aggregate Dispersed Information?, Brice Corgnet, Cary Deck, Mark Desantis, Kyle Hampton, Erik O. Kimbrough
When Do Security Markets Aggregate Dispersed Information?, Brice Corgnet, Cary Deck, Mark Desantis, Kyle Hampton, Erik O. Kimbrough
ESI Publications
We attempt to replicate a seminal paper that offered support for the rational expectations hypothesis and reported evidence that markets with certain features aggregate dispersed information. The original results are based on only a few observations, and our attempt to replicate the key findings with an appropriately powered experiment largely fails. The resulting poststudy probability that market performance is better described by rational expectations than the prior information (Walrasian) model under the conditions specified in the original paper is very low. As a result of our failure to replicate, we investigate an alternate set of market features that combines aspects …