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Information Cascades: Evidence from a Field Experiment with Financial Market Professionals
Author(s) -
ALEVY JONATHAN E.,
HAIGH MICHAEL S.,
LIST JOHN A.
Publication year - 2007
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2007.01204.x
Subject(s) - normative , earnings , field (mathematics) , control (management) , empirical research , domain (mathematical analysis) , business , computer science , accounting , political science , artificial intelligence , statistics , mathematics , pure mathematics , law , mathematical analysis
Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment. Analysis of over 1,500 individual decisions suggests that CBOT professionals behave differently from our student control group. For instance, professionals are better able to discern the quality of public signals and their decisions are not affected by the domain of earnings. These results have implications for market efficiency and are important in both a positive and normative sense.