IDEAS home Printed from https://ideas.repec.org/p/zbw/bamfin/11.html
   My bibliography  Save this paper

Do Insiders Contribute to Market Efficiency? Informational Efficiency and Liquidity of Experimental Call Markets with and without Insiders

Author

Listed:
  • Oehler, Andreas
  • Heilmann, Klaus
  • Läger, Volker

Abstract

This paper reports the results of 13 experimental asset markets with 195 subjects that explore the effects of insider behavior on the price formation process and market liquidity. The experimental call markets use a more realistic design than related studies. We introduce infinitely-lived assets instead of periodical liquidation (so-called 'reset' markets) and provide full market transparency to the investors with an open orderbook. Our main findings are that insider trading does not improve informational efficiency at all but depresses market liquidity of the assets significantly. At a first glance, the observed spread widening as an impact of insider behavior leads to the conclusion that our call markets react 'as if' all subjects behave rationally like dealers in a market making environment. At a second glance, a first look into the individual data shows that only a smaller group of investors act as 'endogenous' market makers in the call market regime.

Suggested Citation

  • Oehler, Andreas & Heilmann, Klaus & Läger, Volker, 2000. "Do Insiders Contribute to Market Efficiency? Informational Efficiency and Liquidity of Experimental Call Markets with and without Insiders," Discussion Papers 11, University of Bamberg, Chair of Finance.
    • Handle: RePEc:zbw:bamfin:11
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/22490/1/bafifo11.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Market Microstructure; Experimental Asset Markets; Insider Behavior; Market Efficiency; Call Markets; Behavioral Finance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bamfin:11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: http://www.uni-bamberg.de/en/bwl-finanz/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.