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Price-Conveyed Information vs. Observed Insider Behavior: A Note on Rational Expectations Convergence

Banks, Jeffrey S. (1984) Price-Conveyed Information vs. Observed Insider Behavior: A Note on Rational Expectations Convergence. Social Science Working Paper, 523. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170919-163219147

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Abstract

The recent experimental results of Plott and Sunder (1982) and Friedman, Harrison and Salmon (1983) on the ability of single commodity markets to "reveal" the underlying state to initially uninformed traders were potentially influenced by a design in which the set of informed traders was held constant throughout the life of the market. Hence the performance of uninformed traders in the market might have been predicated on their knowledge of, and the observed behavior of, the informed traders. The experiment discussed below is a replication of one market in Plott and Sunder (1982), with the added feature that the traders who were to be informed of the state differed from period to period. The results are equivalent to those of Plott and Sunder (1982) in the price dynamics, while less conclusive regarding the acquisition and use of the state-price correspondence by uninformed traders.


Item Type:Report or Paper (Working Paper)
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http://resolver.caltech.edu/CaltechAUTHORS:20171114-140732818Related ItemPublished Version
Additional Information:I would like to thank Charles R. Plott for many helpful suggestions and criticisms. The financial support of NSF grant No. SES-8310461 is gratefully acknowledged. Published as Banks, Jeffrey S. "Price-conveyed information versus observed insider behavior: A note on rational expectations convergence." Journal of Political Economy 93.4 (1985): 807-815.
Group:Social Science Working Papers
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Funding AgencyGrant Number
NSFSES-8310461
Subject Keywords:Memory interference, Market prices, Modeling, Securities trading, Securities markets, Political economy, Economic profit, Rational expectations theory, Economic expectations, Average prices
Record Number:CaltechAUTHORS:20170919-163219147
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20170919-163219147
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81600
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:20 Sep 2017 20:34
Last Modified:15 Nov 2017 23:26

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