Summary
We examine stock market traders' marginal benefits of additional information on the intrinsic value of a stock market security. We use the method of experimental economics to control carefully for the degree of traders' information. Contrary to conventional wisdom we find that it is possible that a marginal unit of additional information does not lead to a marginal increase for a trader's profits. Relatively poorly informed traders can even lose money by using their (limited) available information. However, well informed traders benefit significantly from more information and from using their information when trading.
We are grateful for the financial support of the Raiffeisen-Landesbank Tirol and of the Center of Experimental Economics of the Institute for Public Economics at the University of Innsbruck.
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Huber, J., Kirchler, M., Sutter, M. (2005). On the Benefit of Additional Information in Markets with Heterogeneously Informed Agents — an Experimental Study. In: Lux, T., Samanidou, E., Reitz, S. (eds) Nonlinear Dynamics and Heterogeneous Interacting Agents. Lecture Notes in Economics and Mathematical Systems, vol 550. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-27296-8_4
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DOI: https://doi.org/10.1007/3-540-27296-8_4
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