The Effect of Sequential Information Arrival on Asset Prices: An Experimental Study

A complete understanding of security markets requires a simultaneous explanation of price behavior, trading volume, portfolio composition (ie., asset allocation), and bid-ask spreads. In this paper, these variables are observed in a controlled setting—a computerized double auction market, similar to NASDAQ. Our laboratory allows experimental control of information arrival—whether simultaneously or sequentially received, and whether homogeneous or heterogeneous. We compare the price, volume, and share allocations of three market equilibrium models: telepathic rational expectations, which assumes that traders can read each others minds (strong-form market efficiency); ordinary rational expectations, which assumes traders can use (some) market price information, (a type of semi-strong form efficiency); and private information, where traders use no market information. We conclude 1) that stronger-form market models predict equilibrium prices better than weaker-form models, 2) that there were fewer misallocation forecasts in simultaneous information arrival (SIM) environments, 3) that trading volume was significantly higher in SIM environments, 4) and that bid-ask spreads widen significantly when traders are exposed to price uncertainty resulting from information heterogeneity.     

Testing Rationality in the Point Spread Betting Market

This paper presents empirical tests of market rationality using data from the point spread betting market on National Football League games. Data from this market avoid many common pitfalls of tests of rationality in conventional financial markets. The authors test for rationality with two types of tests, statistical and economic. Results of the tests reveal that the statistical tests cannot reject market rationality while the economic tests do reject market rationality.     

The Impact of Training Intensity on Establishment Productivity

The empirical literature on productivity effects of continuing training is constantly increasing. However, the results on this subject differ widely. Explanations for this worrying diversity seem to lie in differences between countries, labor market institutions, and data generation on one hand, and in differences between the underlying estimation techniques on the other ( Bartel, 2000 ). This paper concentrates on the latter problem and shows how results vary with different estimation techniques.     

A proposed Procedure for Facilitating the Analysis of Lease-Purchase Decisions by Consumers

Advertising extolling the advantages of leasing an automobile is increasing, leading many consumers to ask whether leasing makes sense as an alternative to ownership. This paper sets forth a simple procedure which professional financial advisors and educators can use to help consumers make this decision. The procedure can be applied to any buy-lease decision. In what follows, key variables in the buy-lease decision are identified, and an example using actual data is presented to illustrate the procedure.     

Optimal Aggregation of Money Supply Forecasts: Accuracy,Profitability and Market Efficiency

We present a general procedure for aggregating expert forecasts which exploits regularities in the structure of information within the forecaster population. Specific information structures lead to aggregation methods which adjust for additive bias, differences in individual accuracy, and correlation among forecasts. As an application, we construct composite predictions of the weekly change in the money supply from forecasts made by twenty major securities dealers, for which high positive correlation is found to be a significant characteristic. Due to instability in the information structure, our methods cannot improve on the accuracy of a simple average in this case. However, they do capture information about the correlation among money supply forecasts which is not fully impounded in short-term interest rates. Forecasts from our models accurately predict the direction of price changes for Treasury bills and Treasury bill futures after a money supply announcement.