Discovering the best: Informational efficiency and liquidity of alternative trading mechanisms in experimental asset markets

This paper reports the results of 18 experimental asset markets with 262 subjects that explore the effects of liquidity and aggregation of information. The main focus lies on the comparison of different trading mechanisms of stock exchanges. Compared to most of financial markets experiments, reality is met by introducing long-living assets and integrating all subjects in a multi-period decision-making process. In accordance with the evidence from the empirical research in real financial markets, our results show that the continuous auction achieves the highest informational efficiency. Dealer markets do the worst; call markets (batch trading) reach an intermediate position. A comparable result is achieved regarding the liquidity of the trading mechanisms. For both success factors of real stock exchanges our results show a strong tendency that continuous trading outperforms the other market structures, at least in the framework of the present measurement and on the chosen abstraction level. This does not exclude for the practice to offer a combination with call markets in certain titles and at certain times, particularly, if the here met assumptions of an open market access and information symmetry between the investors do not apply in full extent. --Market Microstructure,Experimental Asset Markets,Market Efficiency,Informational Efficiency,Liquidity,Call Markets,Continuous Auction

Do Insiders Contribute to Market Efficiency? Informational Efficiency and Liquidity of Experimental Call Markets with and without Insiders

This paper reports the results of 13 experimental asset markets with 195 subjects that explore the effects of insider behavior on the price formation process and market liquidity. The experimental call markets use a more realistic design than related studies. We introduce infinitely-lived assets instead of periodical liquidation (so-called ?reset? markets) and provide full market transparency to the investors with an open orderbook. Our main findings are that insider trading does not improve informational efficiency at all but depresses market liquidity of the assets significantly. At a first glance, the observed spread widening as an impact of insider behavior leads to the conclusion that our call markets react ?as if? all subjects behave rationally like dealers in a market making environment. At a second glance, a first look into the individual data shows that only a smaller group of investors act as ?endogenous? market makers in the call market regime. --Market Microstructure,Experimental Asset Markets,Insider Behavior,Market Efficiency,Call Markets,Behavioral Finance

Promotionstitel: Bewertung von Kreditderivaten als Anwendung der stochastischen Modellierung von Kreditrisiken

Zugl.: Bamberg, Univ., Diss., 2002 u.d.T.: Läger, Volker: Bewertung von Kreditderivaten als Anwendung der stochastischen Modellierung von Kreditrisike

A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics Do Insiders Contribute to Market Efficiency? Informational Efficiency and Liquidity of Experimental Call Markets with and without Insiders Do Insiders Contrib

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper reports the results of 13 experimental asset markets with 195 subjects that explore the effects of insider behavior on the price formation process and market liquidity. The experimental call markets use a more realistic design than related studies. We introduce infinitely-lived assets instead of periodical liquidation (so-called "reset" markets) and provide full market transparency to the investors with an open orderbook. Our main findings are that insider trading does not improve informational efficiency at all but depresses market liquidity of the assets significantly. At a first glance, the observed spread widening as an impact of insider behavior leads to the conclusion that our call markets react "as if" all subjects behave rationally like dealers in a market making environment. At a second glance, a first look into the individual data shows that only a smaller group of investors act as "endogenous" market makers in the call market regime. This paper reports the results of 13 experimental asset markets with 195 subjects that explore the effects of insider behavior on the price formation process and market liquidity. The experimental call markets use a more realistic design than related studies. We introduce infinitely-lived assets instead of periodical liquidation (so-called "reset" markets) and provide full market transparency to the investors with an open orderbook. Our main findings are that insider trading does not improve informational efficiency at all but depresses market liquidity of the assets significantly. At a first glance, the observed spread widening as an impact of insider behavior leads to the conclusion that our call markets react "as if" all subjects behave rationally like dealers in a market making environment. At a second glance, a first look into the individual data shows that only a smaller group of investors act as "endogenous" market makers in the call market regime. Terms of use: Documents in JEL Classification: D44, G12, G1

Informationsaggregation, Insiderhandel und Liquidität in experimentellen Call Markets

Abstract Gegenstand dieser Untersuchung ist die Liquidität und die Aggregation von Informationen mit und ohne Insiderhandel in 13 experimentellen Aktienmärkten mit 161 Probanden. Im Unterschied zu den meisten Finanzmarktexperimenten wird die Realitätsnähe dadurch erzeugt, daß langlaufende Wertpapiere modelliert werden und alle Marktakteure in einen mehrperiodigen Entscheidungsprozeß eingebunden sind. Die Verfasser kommen zu dem Ergebnis, daß Insiderhandel die Informationseffizienz eines Marktes nicht statistisch signifikant verbessert, die Liquidität jedoch deutlich negativ beeinflußt. Interessant erscheint in diesem Kontext, daß „dem Markt" zur Abwehr gegen Insider eine Spannenausweitung gelingt. Nach ersten Analysen auf individueller Ebene ist dies auf eine Gruppe von Marktteilnehmern zurückzuführen, die sich wie Marke tmaker verhalten</jats:p

Do insiders contribute to market efficiency? - infomational efficiency and liquidity of experimental call markets with and without insiders

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