Risk Attitude, Beliefs Updating and the Information Content of Trades: An Experiment

Bisière, Christophe, Décamps, Jean-Paul and Lovo, Stefano (2009) Risk Attitude, Beliefs Updating and the Information Content of Trades: An Experiment. TSE Working Paper, n. 09-036

WarningThere is a more recent version of this item available.
[img]
Preview
Text
Download (461kB) | Preview
Official URL: http://tse-fr.eu/pub/21946

Abstract

We conduct a series of experiments that simulate trading in financial markets and which allows us to identify the different effects that subjects’ risk attitudes and belief updating rules have on the information content of the order flow. We find that there are very few risk-neutral subjects and that subjects displaying risk aversion or risk-loving tend to ignore private information when their
prior beliefs on the asset fundamentals are strong. Consequently, private information struggles penetrating trading prices. We find evidence of non-Bayesian belief updating (confirmation bias and under-confidence). This reduces (improves) market efficiency when subjects’ prior beliefs are weak (strong).

Item Type: Monograph (Working Paper)
Language: English
Date: May 2009
Additional Information: révisé en mai 2012
JEL codes: D82 - Asymmetric and Private Information
G14 - Information and Market Efficiency; Event Studies
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSM Research (Toulouse), TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 19 Dec 2011 05:45
Last Modified: 02 Oct 2019 23:00
OAI ID: oai:tse-fr.eu:21946
URI: http://publications.ut-capitole.fr/id/eprint/914

Available Versions of this Item

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year