Economic bubbles and effort gaps in experimental asset markets with heterogeneous information

Abstract

We analyse the relationship of mispricing with the balance between the number of asks and bids in the market. Data used come from Alfarano et al.(2006), where they present the results of treatments with different informational conditions. Our exercise is inspired by Yechiamet. al. (2017). We focus our attention in markets dominated by asks and we study mispricing behaviour when the difference between ask and bid numbers increases. Following the work of Powell and Shestakova (2017), we compare different methods of measuring mispricing too. We find that, the higher the difference between asks and bids in favour of asks, the less mispricing. Also, mispricing is higher when traders do not have the possibility of buying information. Furthermore, we have found that removing repeated data or using the geometric mean instead of the arithmetic one is not relevant for the results.