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Full-Text Articles in Economics
Information Aggregation With Heterogeneous Traders, Cary Deck, Tae In Jun, Laura Razzolini, Tavoy Reid
Information Aggregation With Heterogeneous Traders, Cary Deck, Tae In Jun, Laura Razzolini, Tavoy Reid
ESI Working Papers
The efficient market hypothesis predicts that asset prices reflect all available information. A seminal experiment reported that contingent claim markets could yield market outcomes consistent with information aggregation when traders hold heterogeneous state-contingent values. However, a recent experiment found the rational expectation model outperformed the prior information and maxi-min models in contingent claim markets when traders hold homogeneous values despite the no trade equilibrium in that setting. But that same study failed to replicate the original result calling into question when, if ever, prices reliably reflect the aggregate information of traders with heterogeneous values. In this paper, we show contingent …
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 …