An experimental analysis of information acquisition in prediction markets

Page, L; Siemroth, C

An experimental analysis of information acquisition in prediction markets

Page, L

Siemroth, C

Permalink

Publisher:: ACADEMIC PRESS INC ELSEVIER SCIENCE
Publication Type:: Journal Article
Citation:: Games and Economic Behavior, 2017, 101, pp. 354-378
Issue Date:: 2017-01-01

Closed Access

	Filename	Description	Size
	1-s2.0-S0899825615001505-main.pdf	Published version	1.91 MB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Closed Access

This item is closed access and not available.

Full metadata record

Field	Value	Language
dc.contributor.author	Page, L https://orcid.org/0000-0002-6020-9733
dc.contributor.author	Siemroth, C
dc.date.accessioned	2022-10-03T05:25:59Z
dc.date.available	2022-10-03T05:25:59Z
dc.date.issued	2017-01-01
dc.identifier.citation	Games and Economic Behavior, 2017, 101, pp. 354-378
dc.identifier.issn	0899-8256
dc.identifier.issn	1090-2473
dc.identifier.uri	http://hdl.handle.net/10453/162228
dc.description.abstract	We study which factors in terms of trading environment and trader characteristics determine individual information acquisition in experimental asset markets. Traders with larger endowments, existing inconclusive information, lower risk aversion, and less experience in financial markets tend to acquire more information. Overall, we find that traders overacquire information, so that informed traders on average obtain negative profits net of information costs. Information acquisition and the associated losses do not diminish over time. This overacquisition phenomenon is inconsistent with predictions of rational expectations equilibrium, and we argue it resembles the overdissipation results from the contest literature. We find that more acquired information in the market leads to smaller differences between fundamental asset values and prices. Thus, the overacquisition phenomenon is a novel explanation for the high forecasting accuracy of prediction markets.
dc.language	English
dc.publisher	ACADEMIC PRESS INC ELSEVIER SCIENCE
dc.relation.ispartof	Games and Economic Behavior
dc.relation.isbasedon	10.1016/j.geb.2015.11.002
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1401 Economic Theory, 1402 Applied Economics
dc.subject.classification	Economic Theory
dc.title	An experimental analysis of information acquisition in prediction markets
dc.type	Journal Article
utslib.citation.volume	101
utslib.for	1401 Economic Theory
utslib.for	1402 Applied Economics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2022-10-03T05:25:58Z
pubs.publication-status	Published
pubs.volume	101

Abstract:

We study which factors in terms of trading environment and trader characteristics determine individual information acquisition in experimental asset markets. Traders with larger endowments, existing inconclusive information, lower risk aversion, and less experience in financial markets tend to acquire more information. Overall, we find that traders overacquire information, so that informed traders on average obtain negative profits net of information costs. Information acquisition and the associated losses do not diminish over time. This overacquisition phenomenon is inconsistent with predictions of rational expectations equilibrium, and we argue it resembles the overdissipation results from the contest literature. We find that more acquired information in the market leads to smaller differences between fundamental asset values and prices. Thus, the overacquisition phenomenon is a novel explanation for the high forecasting accuracy of prediction markets.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/162228