Article1996

Quotes, Prices, and Estimates in a Laboratory Market

55 citations0/0 files storedThe Journal of Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Corporate Finance and Governance Stochastic processes and financial applications

Abstract

ABSTRACT This study examines the behavior of laboratory markets in which two uninformed market makers compete to trade with heterogeneously informed investors. The data provide three main results. First, market makers set quotes to protect against adverse selection and to control inventory. Second, when investors are less well‐informed, their trades are less reliable measures of their information, and market makers respond to those trades with greater skepticism. Third, errors in market makers' reactions to trades cause the time‐series behavior of quotes and prices to depend on the information environment in ways beyond those captured in extant theory.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 55 citations exist upstream.

References

1985Bid, ask and transaction prices in a specialist market with heterogeneously informed traders 1984A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market 1987Price, trade size, and information in securities markets 1991Measuring the Information Content of Stock Trades 1992The weighing of evidence and the determinants of confidence 1986Stock return variances 1988Estimating the components of the bid/ask spread 1996Liquidity, Information, and Infrequently Traded Stocks

Cited by

2010Experimental Finance 2002Price Formation and Market Quality When the Number and Presence of Insiders Is Unknown 2000The Opportunity for Conspiracy in Asset Markets Organized with Dealer Intermediaries 2001Marketmaking in the Laboratory: Does Competition Matter?2009Price discovery in the round-the-clock U.S. Treasury market 1998Laboratory experiments in corporate and investment finance: a survey

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.