Reconsidering Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets
GATE Lyon Saint-Etienne Working Paper 1920
52 Pages Posted: 14 Jun 2019
Date Written: May 2019
The ability of markets to aggregate diverse information is a cornerstone of economics and finance, and empirical evidence for such aggregation has been demonstrated in previous laboratory experiments. Most notably Plott and Sunder (1988) find clear support for the rational expectations hypothesis in their Series B and C markets. However, recent studies have called into question the robustness of these findings. In this paper, we report the result of a direct replication of the key information aggregation results presented in Plott and Sunder. We do not find the same strong evidence in support of rational expectations that Plott and Sunder report suggesting information aggregation is a fragile property of markets.
Keywords: Aggregation, Efficient Markets, Rational Expectations, Experiments, Replication
JEL Classification: D92, G14
Suggested Citation: Suggested Citation