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Information Mirages in Experimental Asset Markets

Colin Camerer and Keith Weigelt
The Journal of Business
Vol. 64, No. 4 (Oct., 1991), pp. 463-493
Stable URL: http://www.jstor.org/stable/2353290
Page Count: 31
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Abstract

One explanation for the apparent volatility of asset prices is that people overreact to trades that are uninformative, creating self-generated information "mirages." We test whether mirages occur in experimental asset markets. There are insiders in only half the periods, so traders cannot be sure if the trades of others reveal information. We observed four clear miages in 47 periods without insiders. Mirages always occurred early in an experimental session; in later periods, traders learn whether there are insiders by observing nonprice information such as the speed of trading, and mirages occurred only temporarily.

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