Transaction costs and informational cascades in financial markets |
| |
| Affiliation: | 1. School of Information and Communication Engineering, Beijing University of Posts and Telecommunications, Beijing, China;2. School of Information Science & Engineering, University of Jinan, China;3. Department of Computer Science and Engineering, Hanyang University, Republic of Korea;1. Hospital de Clínicas, Universidad de Buenos Aires, Buenos Aires, Argentina;2. Department of Health Economy & Society, Centro de Estudios de Estado y Sociedad, Buenos Aires, Argentina;3. Department of Tobacco Research, Center for Population Health Research, National Institute of Public Health, Cuernavaca, Mexico;4. Department of Health Promotion, Education, and Behavior, University of South Carolina, Columbia, SC, USA;5. Department of Pediatrics, Dartmouth Medical School, Hanover, NH, USA;1. Queen''s Management School, Queen''s University Belfast, Northern Ireland, UK;2. Cardinal Analytics Ltd, Belfast, Northern Ireland, UK;1. Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19013, USA;2. University of Pennsylvania and NBER, USA |
| |
| Abstract: | We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We implement a financial market with sequential trading and transaction costs in the laboratory. According to theory, eventually all traders neglect their private information and abstain from trading (i.e., a no-trade informational cascade occurs). We find that, in the experiment, informational no-trade cascades occur when theory predicts they should (i.e., when the trade imbalance is sufficiently high). At the same time, the proportion of subjects irrationally trading against their private information is smaller than in a financial market without transaction costs. As a result, the overall efficiency of the market is not significantly affected by the presence of transaction costs. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
