Costly Information Acquisition, Social Networks, and Asset Prices : Experimental Evidence
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
Original language | English |
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Pages (from-to) | 1975-2010 |
Journal / Publication | Journal of Finance |
Volume | 74 |
Issue number | 4 |
Online published | 27 Feb 2019 |
Publication status | Published - Aug 2019 |
Link(s)
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.
In: Journal of Finance, Vol. 74, No. 4, 08.2019, p. 1975-2010.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review