Costly Information Acquisition, Social Networks, and Asset Prices : Experimental Evidence

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

7 Scopus Citations
View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)1975-2010
Journal / PublicationJournal of Finance
Volume74
Issue number4
Online published27 Feb 2019
Publication statusPublished - Aug 2019

Abstract

We design an experiment to study the implications of information networks for incentives to acquire costly information, market liquidity, investors' earnings, and asset price characteristics in a financial market. Social communication crowds out information production as a result of an agent's temptation to free ride on the signals purchased by her neighbors. Although information exchange among traders increases trading volume, improves liquidity, and enhances the ability of asset prices to reflect the available information in the market, it fails to improve price informativeness. Net earnings and social welfare are higher with information sharing due to reduced acquisition of costly signals.

Citation Format(s)

Costly Information Acquisition, Social Networks, and Asset Prices : Experimental Evidence. / Halim, Edward; Riyanto, Yohanes E.; Roy, Nilanjan.

In: Journal of Finance, Vol. 74, No. 4, 08.2019, p. 1975-2010.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review