Division of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 Inducing Liquidity in Thin Financial Markets through Combined-value Trading Mechanisms
نویسندگان
چکیده
Previous experimental research has shown that thin financial markets fail to fully equilibrate, in contrast with thick markets. A specific type of market risk is conjectured to be the reason, namely, the risk of partial execution of desired portfolio rearrangements in a system of parallel, unconnected double auction markets. This market risk causes liquidity to dry up before equilibrium is reached. To verify the conjecture, we organized markets directly as a portfolio trading mechanism, allowing agents to better coordinate their orders across securities. The mechanism is an implementation of the combined-value trading (CVT) system. We present evidence that our portfolio trading mechanism facilitates equilibration to the same extent as thick markets do. Like in thick markets, the emergence of equilibrium pricing cannot be attributed to chance. Inspection of order submission and trade activity reveals that subjects manage to exploit the direct linkages between markets presented by the CVT system.
منابع مشابه
Nber Working Paper Series Experimenting with Measurement Error: Techniques with Applications to the Caltech Cohort Study
Measurement error is ubiquitous in experimental work. It leads to imperfect statistical controls, attenuated estimated effects of elicited behaviors, and biased correlations between characteristics. We develop simple statistical techniques for dealing with experimental measurement error. These techniques are applied to data from the Caltech Cohort Study, which conducts repeated incentivized sur...
متن کاملDivision of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 on Incentives and Updating in Agent Based Models
متن کامل
Concurrent Trading in Two Experimental Markets with Demand Interdependence
Arlington W. Williams, Vernon L. Smith, John O. Ledyard, Steven Gjerstad 1 Department of Economics, Wylie Hall 105, Indiana University, Bloomington, IN 47405 2 Economics Science Laboratory, McClelland Hall 116, University of Arizona, Tuscon, AZ 85721 3 Division of Humanities and Social Sciences, 228 77, California Institute of Technology, Pasadena, CA 91125 4 T. J. Watson Research Center, IBM C...
متن کامل