Asset Prices and Informed Trader's Abilities: Evidence From Experimental Asset Markets
- Topics:
- Investment and Capital Markets
- Source:
- Federal Reserve Bank of Atlanta
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Overview: This study reports the results of fifteen experimental asset markets designed to investigate the effects of forecasts on market prices, traders' abilities to assess asset value, and the link between the two. Across the fifteen markets, the paper investigates alternative forecast-generating processes. In some markets the process produces an unbiased estimate of asset value and in others a biased estimate. The processes generating the biased forecasts, though, are less variable than the process generating the unbiased forecast. The paper finds that, in general, period-end asset price reflects private forecasts, regardless of the forecast-generating process. Subsequently, it investigates whether traders' abilities to use forecasts differ across the forecast-generating processes.
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Format: PDF | Size: 151KB | Date: Dec 2002 | Pages: 45
