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Information aggregation in experimental asset markets in the presence of a manipulator

Published online by Cambridge University Press:  14 March 2025

Helena Veiga  and
Marc Vorsatz
Helena Veiga*
Affiliation:
Department of Statistics, Universidad Carlos III Madrid, Calle Madrid 126, 28903 Getafe, Spain Finance Research Center, ISCTE Business School, Avenida de las Forças Armadas, 1600-1683 Lisbon, Portugal
Marc Vorsatz*
Affiliation:
Fundación de Estudios de Economía Aplicada (FEDEA), Calle Jorge Juan 46, 28001 Madrid, Spain
*
e-mail: mhveiga@est-econ.uc3m.es
e-mail: mvorsatz@fedea.es
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Abstract

We study with the help of a laboratory experiment the conditions under which an uninformed manipulator—a robot trader that unconditionally buys several shares of a common value asset in the beginning of a trading period and unwinds this position later on—is able to induce higher asset prices. We find that the average price is significantly higher in the presence of the manipulator if and only if the asset takes the lowest possible value and insiders receive perfect information about the true value of the asset. It is also evidenced that the robot trader makes trading gains. Finally, both uninformed and partially informed traders may suffer from the presence of the robot.

Keywords

Asset marketExperimentPrice manipulationRational expectations

JEL classification

G12: Asset Pricing • Trading Volume • Bond Interest Rates C90: General G14: Information and Market Efficiency • Event Studies • Insider Trading

Information

Type
Research Article
Information
Experimental Economics , Volume 13 , Issue 4 , December 2010 , pp. 379 - 398
Copyright
Copyright © Economic Science Association 2010

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Footnotes

H. Veiga acknowledges financial support from the Spanish Ministry of Education and Science through the research projects through the research projects MTM2009-13985-C02-01 and ECQ2009-08900.

M. Vorsatz acknowledges financial support from the Spanish Ministry of Education and Science, through the Ramón y Cajal program and the project ECO2009-07530.

Electronic supplementary material The online version of this article (doi: 10.1007/s10683-010-9247-3) contains supplementary material, which is available to authorized users.

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