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Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models

Plott, Charles R. and Sunder, Shyam (1982) Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models. Journal of Political Economy, 90 (4). pp. 663-698. ISSN 0022-3808. http://resolver.caltech.edu/CaltechAUTHORS:20131219-120820624

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Abstract

The study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one-priced security. Returns to the security depended upon a randomly drawn state of nature. Some agents (insiders), whose identity was unknown to other agents, knew the state before the markets opened. With replication of market conditions, the predictions of a fully revealing rational-expectations model are relatively accurate. Prices adjusted immediately to near rational-expectations prices; profits of insiders were virtually indistinguishable from non-insiders; and efficiency levels converged to near 100 percent.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1086/261084 DOIArticle
http://www.jstor.org/stable/1831348PublisherArticle
http://resolver.caltech.edu/CaltechAUTHORS:20171010-135309558Related ItemWorking Paper
Additional Information:© 1982 by The University of Chicago. The financial support of the National Science Foundation, Coopers and Lybrand Foundation, and the Caltech Program for Enterprise and Public Policy is gratefully acknowledged. We have benefited from many conversations with Robert Forsythe and James Jordan. We would also like to thank Stanley Reiter whose comments led to experiment 5.
Group:Social Science Working Papers
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NSFUNSPECIFIED
Coopers and Lybrand FoundationUNSPECIFIED
Caltech Program for Enterprise and Public PolicyUNSPECIFIED
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Social Science Working Paper331
Record Number:CaltechAUTHORS:20131219-120820624
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20131219-120820624
Official Citation:Efficiency of Experimental Security Markets with Insider Information: An Application of Rational-Expectations Models Charles R. Plott and Shyam Sunder Journal of Political Economy , Vol. 90, No. 4 (Aug., 1982) , pp. 663-698 Published by: The University of Chicago Press Article Stable URL: http://www.jstor.org/stable/1831348
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:43103
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:20 Dec 2013 15:44
Last Modified:11 Oct 2017 18:20

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