Risk A version and Information Structure: An Experimental Study of Price Variability in the Securities Markets

  • Author(s): JAMES S. ANG, THOMAS SCHWARZ
  • Published: Apr 30, 2012
  • Pages: 825-844
  • DOI: 10.1111/j.1540-6261.1985.tb05008.x

ABSTRACT

This study investigates the differences in the behaviors between the speculative investors and the conservative investors in two separate experimental markets. Although the market for speculators shows greater price volatility in both bid/ask spread within a trade as well as with intraperiod variances, it exhibits several desirable properties. Specifically, the price patterns tend to converge closer, and at a greater speed to either the prior information equilibrium price or the rational expectation equilibrium price. It also achieves better allocational efficiency. And, it is also less likely to be misled by potentially “false” price information.

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