Overweighting of public information in financial markets: A lesson from the lab
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Altres documents de l'autoria: Ruiz-Buforn, Alba; Camacho Cuena, Eva; MORONE, ANDREA; Alfarano, Simone
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comunitat-uji-handle3:10234/8644
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Títol
Overweighting of public information in financial markets: A lesson from the labData de publicació
2021-08-18Editor
ElsevierISSN
0378-4266Cita bibliogràfica
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.Tipus de document
info:eu-repo/semantics/articleVersió de l'editorial
https://www.sciencedirect.com/science/article/pii/S0378426621002508?via%3DihubVersió
info:eu-repo/semantics/publishedVersionParaules clau / Matèries
Resum
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 ... [+]
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. [-]
Publicat a
Journal of Banking and Finance 133 (2021) 106298Dades relacionades
https://ars.els-cdn.com/content/image/1-s2.0-S0378426621002508-mmc1.ziphttp://hdl.handle.net/10234/194878
Entitat finançadora
Universitat Jaume I | Ministerio de Ciencia, Innovación y Universidades (Spain) | Ministerio de Educación
Codi del projecte o subvenció
UJI-B2018- 77 | RTI2018-096927-B-I00 | FPU2014/01104
Drets d'accés
info:eu-repo/semantics/openAccess
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