Data and Code for: Market Panics, Frenzies, and Informational Efficiency
- Kendall, Chad (University of Southern California, Marshall)
AbstractIn a market rush, the fear of future adverse price movements causes traders to trade before they become well-informed, reducing the informational efficiency of the market. I derive theoretical conditions under which market rushes are equilibrium behavior and study how well these conditions organize trading behavior in a laboratory implementation of the model. Market rushes, including both panics and frenzies, occur more frequently when predicted by theory. However, subjects use commonly-discussed, momentum-like strategies that lead to informational losses not predicted by theory, suggesting that these strategies may exacerbate both the occurrence and consequences of panics and frenzies.
Is version of
Kendall, Chad. “Market Panics, Frenzies, and Informational Efficiency: Theory and Experiment.” American Economic Journal: Microeconomics, n.d.
Update Metadata: 2020-07-23 | Issue Number: 1 | Registration Date: 2020-07-23