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Full-Text Articles in Econometrics
On Booms That Never Bust: Ambiguity In Experimental Asset Markets With Bubbles, Brice Corgnet, Roberto Hernán-González, Praveen Kujal
On Booms That Never Bust: Ambiguity In Experimental Asset Markets With Bubbles, Brice Corgnet, Roberto Hernán-González, Praveen Kujal
ESI Working Papers
We study the effect of ambiguity on the formation of bubbles and on the occurrence of crashes in experimental asset markets à la Smith, Suchanek, and Williams (1988). We extend their framework to an environment where the fundamental value of the asset is ambiguous. We show that, when the fundamental value is ambiguous, asset prices tend to be lower than when it is risky although bubbles form in both the ambiguous and the risky environments. Additionally, bubbles do not crash in the ambiguous case whereas they do so in the risky one. These findings regarding depressed prices and the absence …
The Distribution Of Information And The Price Efficiency Of Markets, Brice Corgnet, Mark Desantis, David Porter
The Distribution Of Information And The Price Efficiency Of Markets, Brice Corgnet, Mark Desantis, David Porter
ESI Working Papers
Apparently contradictory evidence has accumulated regarding the extent to which financial markets are informationally efficient. Shedding new light on this old debate, we show that differences in the distribution of private information may explain why informational efficiency can vary greatly across markets. We find that markets are informationally efficient when complete information is concentrated in the hands of competing insiders whereas they are less efficient when private information is dispersed across traders. A learning model helps to illustrate why inferring others’ private information from prices takes more time when information is more dispersed. We discuss the implications of our findings …