Friday Monthly Meeting - Nobi Hanaki (GREDEG)

"Diversity in Cognitive Ability and Mispricing in Experimental Asset Markets"
Quand ? Le 09-09-2016,
de 10:00 à 12:00
Où ? ISEM - Salle SCI
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9 September 2016 – Start

ROOM SCI ISEM

Nobi Hanaki


Title: Diversity in cognitive ability and mispricing in experimental asset markets


Abstract:

 

Does diversity in cognitive ability among market participants enlarges mis-pricing? Does the common knowledge of heterogeneity (or homogeneity) among the cognitive ability of market participants further enlarges the mispricing? We investigated these questions by first measuring subjects' cognitive ability and categorizing them as `H' type for those above median ability and `L' type for those below median ability. We then constructed three kinds of markets with six traders each: 6H, 6L, and 3H3L. Subjects were informed of their own cognitive type and, depending on the treatment,  also that of the others in their market. We found heterogeneous markets (3H3L) generated significantly larger mispricing than homogeneous markets (6H or 6L) regardless of whether subjects were informed about the cognitive type of others in the market. Thus, diversity in cognitive ability among market participants enlarged mispricing. However, common knowledge of heterogeneity or homogeneity did not have significant additional effects.