Immediate Disclosure or Secrecy? The Release of Information in Experimental Asset Markets

26 Pages Posted: 18 Dec 2004

See all articles by Lucy F. Ackert

Lucy F. Ackert

Kennesaw State University - Michael J. Coles College of Business

Bryan K. Church

Georgia Institute of Technology - Accounting Area

Ann B. Gillette

Kennesaw State University - Michael J. Coles College of Business; Federal Reserve Banks - Federal Reserve Bank of Atlanta

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Abstract

This paper reports the results of experimental asset markets designed to investigate how the public disclosure of uncertain information affects market and individual outcomes. In some markets, no information is released as trading starts, and in others, an imperfect pre-announcement is disclosed. The reliability of the pre-announcement varies across markets. Our data indicate under-reaction to a pre-announcement that is highly reliable and over-reaction to one with much lower reliability. Price volatility is higher and allocational efficiency is lower with a pre-announcement that reflects substantial uncertainty. Furthermore, when the reliability of the pre-announcement is low, traders extract a smaller proportion of the total attainable profit. Thus, in a highly uncertain environment better outcomes may result when information is withheld. These results have important policy implications regarding the disclosure of information by the Federal Reserve. In a highly uncertain environment, better outcomes may actually result with information.

Suggested Citation

Ackert, Lucy F. and Church, Bryan K. and Gillette, Ann Brewer, Immediate Disclosure or Secrecy? The Release of Information in Experimental Asset Markets. Available at SSRN: https://ssrn.com/abstract=628761

Lucy F. Ackert (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Department of Economics and Finance
Kennesaw, GA 30144
United States
770-423-6111 (Phone)
770-499-3209 (Fax)

Bryan K. Church

Georgia Institute of Technology - Accounting Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-3907 (Phone)
404-894-6030 (Fax)

Ann Brewer Gillette

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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