Costly information acquisition, social networks, and asset prices : experimental evidence
We design an experiment to study the implications of information networks for incentives to acquire costly information, market liquidity, investors' earnings, and asset price characteristics in a financial market. Social communication crowds out information production as a result of an agent�...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
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2020
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| Online Access: | https://hdl.handle.net/10356/142871 |
| _version_ | 1824455693891010560 |
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| author | Halim, Edward Riyanto, Yohanes Eko Roy, Nilanjan |
| author2 | School of Social Sciences |
| author_facet | School of Social Sciences Halim, Edward Riyanto, Yohanes Eko Roy, Nilanjan |
| author_sort | Halim, Edward |
| collection | NTU |
| description | We design an experiment to study the implications of information networks for incentives to acquire costly information, market liquidity, investors' earnings, and asset price characteristics in a financial market. Social communication crowds out information production as a result of an agent's temptation to free ride on the signals purchased by her neighbors. Although information exchange among traders increases trading volume, improves liquidity, and enhances the ability of asset prices to reflect the available information in the market, it fails to improve price informativeness. Net earnings and social welfare are higher with information sharing due to reduced acquisition of costly signals. |
| first_indexed | 2025-02-19T03:42:16Z |
| format | Journal Article |
| id | ntu-10356/142871 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2025-02-19T03:42:16Z |
| publishDate | 2020 |
| record_format | dspace |
| spelling | ntu-10356/1428712020-07-06T07:18:41Z Costly information acquisition, social networks, and asset prices : experimental evidence Halim, Edward Riyanto, Yohanes Eko Roy, Nilanjan School of Social Sciences Social sciences::Economic theory Social Networks Asset Prices We design an experiment to study the implications of information networks for incentives to acquire costly information, market liquidity, investors' earnings, and asset price characteristics in a financial market. Social communication crowds out information production as a result of an agent's temptation to free ride on the signals purchased by her neighbors. Although information exchange among traders increases trading volume, improves liquidity, and enhances the ability of asset prices to reflect the available information in the market, it fails to improve price informativeness. Net earnings and social welfare are higher with information sharing due to reduced acquisition of costly signals. MOE (Min. of Education, S’pore) Accepted version 2020-07-06T07:18:40Z 2020-07-06T07:18:40Z 2019 Journal Article Halim, E., Riyanto, Y. E. & Roy, N. (2019). Costly information acquisition, social networks, and asset prices : experimental evidence. The Journal of Finance, 74(4), 1975-2010. doi:10.1111/jofi.12768 0022-1082 https://hdl.handle.net/10356/142871 10.1111/jofi.12768 2-s2.0-85062972562 4 74 1975 2010 en The Journal of Finance © 2019 The American Finance Association. All rights reserved. This paper was published in The Journal of Finance and is made available with permission of The American Finance Association. application/pdf |
| spellingShingle | Social sciences::Economic theory Social Networks Asset Prices Halim, Edward Riyanto, Yohanes Eko Roy, Nilanjan Costly information acquisition, social networks, and asset prices : experimental evidence |
| title | Costly information acquisition, social networks, and asset prices : experimental evidence |
| title_full | Costly information acquisition, social networks, and asset prices : experimental evidence |
| title_fullStr | Costly information acquisition, social networks, and asset prices : experimental evidence |
| title_full_unstemmed | Costly information acquisition, social networks, and asset prices : experimental evidence |
| title_short | Costly information acquisition, social networks, and asset prices : experimental evidence |
| title_sort | costly information acquisition social networks and asset prices experimental evidence |
| topic | Social sciences::Economic theory Social Networks Asset Prices |
| url | https://hdl.handle.net/10356/142871 |
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