The effect of reliability, content and timing of public announcements on asset trading behavior

Corgnet, Brice, Kujal, Praveen and Porter, David (2010) The effect of reliability, content and timing of public announcements on asset trading behavior. Journal of Economic Behavior & Organization, 76 (2). pp. 254-266. ISSN 0167-2681 (doi:10.1016/j.jebo.2010.06.014)

Abstract

Financial markets are overwhelmed by daily announcements. We use experimental asset markets to assess the impact of releasing public messages with different levels of reliability on asset prices. Subjects receive qualitative announcements in predetermined trading periods that are either preset by the experimenter, randomly selected, or determined by past asset market prices. We find that messages can play a significant role in bubble abatement, or rekindling. The preset message, “The price is too high,” decreases the amplitude and duration of bubbles for inexperienced subjects. Announcements that depend on the actual level of mispricing reduce bubble magnitude. Meanwhile, a preset or random message, “The price is too low,” prevents experienced subjects from abating bubbles. We account for the effect of public messages by showing that they significantly reduce inconsistent (“irrational”) trading behavior.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 11985
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Depositing User: Users 3197 not found.
Date Deposited: 19 Sep 2013 14:50
Last Modified: 19 Apr 2017 09:45
URI: https://eprints.mdx.ac.uk/id/eprint/11985

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