Export to your Reference Manger

Please Copy & Paste



Bookmark and Share

Transaction costs and informational cascades in financial markets

[journal article]

Cipriani, Marco; Guarino, Antonio

fulltextDownloadDownload full text

(552 KByte)

Citation Suggestion

Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-277443

Further Details
Abstract "We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We implement a financial market with sequential trading and transaction costs in the laboratory. According to theory, eventually all traders neglect their private information and abstain from trading (i.e., a no-trade informational cascade occurs). We find that, in the experiment, informational no-trade cascades occur when theory predicts they should (i.e., when the trade imbalance is sufficiently high). At the same time, the proportion of subjects irrationally trading against their private information is smaller than in a financial market without transaction costs. As a result, the overall efficiency of the market is not significantly affected by the presence of transaction costs." [author's abstract]
Classification National Economy
Document language English
Publication Year 2008
Page/Pages p. 581-592
Journal Journal of Economic Behavior & Organization, 68 (2008) 3-4
DOI http://dx.doi.org/10.1016/j.jebo.2008.08.001
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)