eprintid: 14637
rev_number: 29
eprint_status: archive
userid: 600
dir: disk0/00/01/46/37
datestamp: 2009-07-31 13:12:50
lastmod: 2015-07-23 09:36:23
status_changed: 2009-07-31 13:12:49
type: working_paper
metadata_visibility: show
creators_name: Cipriani, M.
creators_name: Guarino, A.
creators_id: 
creators_id: AGUAR93
title: Herding and price convergence in a laboratory financial market
ispublished: pub
subjects: 12000
subjects: 13200
divisions: F24
keywords: JEL classification: C92, D8, G14
abstract: We study whether herding can arise in a laboratory financial market
in which agents trade sequentially. Agents trade an asset whose
value is unknown and whose price is efficiently set by a market maker.
We show that the presence of a price mechanism destroys the possibility
of herding. Most agents follow their private information and
prices converge to the fundamental value. This result contrasts with
the case of a fixed price, where herding and cascades arise. When the
price moves, however, agents may behave as contrarian, i.e., they may
trade against the market, something not accounted for by the theory.
Finally, we study whether informational cascades arise when trade is
costly (e.g, because of a Tobin tax). With trade costs, most subjects
rationally decided not to trade and the price was unable to aggregate
private information efficiently.
date: 2002-12
publisher: ESRC Centre for Economic Learning and Social Evolution
official_url: http://else.econ.ucl.ac.uk/newweb/papers.php#2002
vfaculties: VSHS
oa_status: green
language: eng
primo: open
primo_central: open_green
lyricists_name: Guarino, A
lyricists_id: AGUAR93
full_text_status: public
series: ELSE Working Papers
number: 71
place_of_pub: London, UK
citation:        Cipriani, M.;    Guarino, A.;      (2002)    Herding and price convergence in a laboratory financial market.                    (ELSE Working Papers  71). ESRC Centre for Economic Learning and Social Evolution: London, UK.       Green open access   
 
document_url: https://discovery.ucl.ac.uk/id/eprint/14637/1/14637.pdf