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Overweighting of public information in financial markets: A lesson from the lab
dc.contributor.author | Ruiz-Buforn, Alba | |
dc.contributor.author | Camacho Cuena, Eva | |
dc.contributor.author | MORONE, ANDREA | |
dc.contributor.author | Alfarano, Simone | |
dc.date.accessioned | 2021-10-01T08:00:03Z | |
dc.date.available | 2021-10-01T08:00:03Z | |
dc.date.issued | 2021-08-18 | |
dc.identifier.citation | RUIZ-BUFORN, Alba, et al. Overweighting of public information in financial markets: A lesson from the lab. Journal of Banking & Finance, 2021, vol. 133, p. 106298. | ca_CA |
dc.identifier.issn | 0378-4266 | |
dc.identifier.uri | http://hdl.handle.net/10234/194874 | |
dc.description.abstract | We study the information aggregation process in a laboratory financial market where traders have access to costly private and free public imperfect information. The public disclosure provokes (i) a crowding-out effect on traders’ information demand, (ii) a market overreaction to the public signal, and (iii) a deterioration in price informativeness. We show that the reduction in price informativeness is a direct consequence of the overweighting of public information when aggregated in prices. Moreover, we provide experimental evidence for the theoretical conjecture that the overweighting effect and the subsequent market overreaction to public disclosures are directly related to traders’ second- (or higher) order beliefs. From an economic policy perspective, we provide support that when deciding on a communication strategy, regulatory institutions can smooth the market overreaction by properly setting the level of transparency of their disclosures. | ca_CA |
dc.description.sponsorShip | Funding for open access charge: CRUE-Universitat Jaume I | |
dc.format.extent | 20 p. | ca_CA |
dc.format.mimetype | application/pdf | ca_CA |
dc.language.iso | eng | ca_CA |
dc.publisher | Elsevier | ca_CA |
dc.relation.isPartOf | Journal of Banking and Finance 133 (2021) 106298 | ca_CA |
dc.relation.uri | https://ars.els-cdn.com/content/image/1-s2.0-S0378426621002508-mmc1.zip | ca_CA |
dc.relation.uri | http://hdl.handle.net/10234/194878 | |
dc.rights | © 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) | ca_CA |
dc.rights.uri | http://creativecommons.org/licenses/by-nc-nd/4.0/ | ca_CA |
dc.subject | experiment | ca_CA |
dc.subject | prediction markets | ca_CA |
dc.subject | public information | ca_CA |
dc.subject | overweighting | ca_CA |
dc.subject | crowding-out | ca_CA |
dc.title | Overweighting of public information in financial markets: A lesson from the lab | ca_CA |
dc.type | info:eu-repo/semantics/article | ca_CA |
dc.subject.jel | C92 | ca_CA |
dc.subject.jel | D82 | ca_CA |
dc.subject.jel | G14 | ca_CA |
dc.identifier.doi | https://doi.org/10.1016/j.jbankfin.2021.106298 | |
dc.rights.accessRights | info:eu-repo/semantics/openAccess | ca_CA |
dc.relation.publisherVersion | https://www.sciencedirect.com/science/article/pii/S0378426621002508?via%3Dihub | ca_CA |
dc.type.version | info:eu-repo/semantics/publishedVersion | ca_CA |
project.funder.name | Universitat Jaume I | ca_CA |
project.funder.name | Ministerio de Ciencia, Innovación y Universidades (Spain) | ca_CA |
project.funder.name | Ministerio de Educación | ca_CA |
oaire.awardNumber | UJI-B2018- 77 | ca_CA |
oaire.awardNumber | RTI2018-096927-B-I00 | ca_CA |
oaire.awardNumber | FPU2014/01104 | ca_CA |
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