How Much Information is Incorporated in Financial Asset Prices? Experimental Evidence

Review of Financial Studies, forthcoming

57 Pages Posted: 6 Mar 2018 Last revised: 15 Sep 2020

See all articles by Lionel Page

Lionel Page

Queensland University of Technology

Christoph Siemroth

University of Essex - Department of Economics

Date Written: September 15, 2020

Abstract

We investigate the informational content of prices in financial asset markets. To do so we use a large number of market experiments where the amount of information held by traders is precisely observed. We derive a new method to estimate how much of this information is incorporated in market prices. We find that public information is almost completely reflected in prices, but that surprisingly little private information---less than 50%---is incorporated in prices. Our estimates therefore suggest that while semi-strong informational efficiency is consistent with the data, financial market prices may be very far from strong-form efficiency.

Keywords: Asymmetric Information, Efficient Market Hypothesis, Experimental Asset Markets, Informational Efficiency, Meta Study, Private Information

JEL Classification: C92, D82, D84, G14

Suggested Citation

Page, Lionel and Siemroth, Christoph, How Much Information is Incorporated in Financial Asset Prices? Experimental Evidence (September 15, 2020). Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=3130307 or http://dx.doi.org/10.2139/ssrn.3130307

Lionel Page

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Christoph Siemroth (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

HOME PAGE: http://sites.google.com/site/csiemroth/

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