Learning from Trading with Ambiguous Information

54 Pages Posted: 20 Feb 2014

See all articles by Ido Kallir

Ido Kallir

Ono Academic College

Aharon R. Ofer

Northwestern University - Kellogg School of Management; Tel Aviv University - The Leon Recanati Graduate School of Business Administration

Date Written: February 19, 2014

Abstract

In this paper we study long-term learning process under the conditions of ambiguous information. We study a unique empirical setting in which pieces of the ambiguous information are sequentially provided to institutional investors. We use parametric and non-parametric models to show that the actual convergence process is non-linear and takes a specific, sigmoid shape. We show that the learning process is strict and that the convergence is towards an unbiased point that represents the set of prices, which are dictated by the available information. The theoretical and experimental literature on learning processes is rich, but there are only a handful of empirical studies. We contribute direct empirical evidence that supports important theoretical and experimental predictions.

Keywords: Ambiguous Information, Learning process, Trade, Bonds

JEL Classification: G12, G23, G24

Suggested Citation

Kallir, Ido and Ofer, Aharon R., Learning from Trading with Ambiguous Information (February 19, 2014). Available at SSRN: https://ssrn.com/abstract=2398320 or http://dx.doi.org/10.2139/ssrn.2398320

Ido Kallir (Contact Author)

Ono Academic College ( email )

Tzahal Street 104
Kiryat Ono, 55000
Israel

Aharon R. Ofer

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-3562 (Phone)
847-491-5719 (Fax)

Tel Aviv University - The Leon Recanati Graduate School of Business Administration

P.O. Box 39010
Ramat Aviv Tel Aviv 69972, 69978
Israel

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