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The Effect of Trading Option Type Claims on the Efficiency of Experimental Security Markets (A Preliminary Report)

Plott, Charles R. and Sunder, Shyam (1982) The Effect of Trading Option Type Claims on the Efficiency of Experimental Security Markets (A Preliminary Report). In: Proceedings: Seminar on the Analysis of Security Prices. University of Chicago Graduate School of Business , Chicago, IL, pp. 243-250. http://resolver.caltech.edu/CaltechAUTHORS:20140303-142715523

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Abstract

Recent theories in economics claim that markets solve not only the classical allocation problem of getting buyers and sellers together efficiently but that markets can also perform another function. Namely, markets can aggregate and disseminate information. By watching the price of a stock, "outsiders" can infer what insiders know. This is a variant of the rational expectations hypothesis. If a group of insiders are competing for securities in the market, someone outside the firm can learn almost anything about the company by simply watching the economic consequences of the behavior of these people. This incredible idea is that markets themselves can serve to aggregate and disseminate information that no one in particular has an interest in allowing other people to know. Our original research was based on the assumption that this idea is bananas. In this talk I will provide you with some brief impressions of what we have observed.


Item Type:Book Section
Additional Information:© 1982 University of Chicago.
Record Number:CaltechAUTHORS:20140303-142715523
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20140303-142715523
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44101
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:12 Mar 2014 20:44
Last Modified:13 Mar 2014 01:00

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