Private Information and Overcondence in Experimental Asset Markets
نویسنده
چکیده
I study the use and overuse of private signals of fundamental value in a common type of experimental asset market. I also assess the impact of two kinds of psychological overcon dence miscalibration, and the "better than average e¤ect" on the use of private signals, and on market outcomes. Traders use their private signals to make buying and selling decisions. Private signals also a¤ect tradersreservation prices. The use of forecasts does not vary depending on measured overcon dence, with the exception that miscalibrated buyers may pay higher prices for assets. Overcon dent traders do not trade more, and may actually perform better than other traders. Although the sample size is small, there is a correlation between market volume and the average "better than average e¤ect" of the market. However, there is no observed relationship between average overcon dence and market price or volatility. These results provide strong support for models of nancial markets in which traders overweight private signals; however, they o¤er only mixed and tepid support for psychological overcon dence as the root cause of this overweighting.
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