Market behavior in the presence of divergent and imperfect private information: experimental evidence from Canada, China, and the United States

Abstract

We conduct 27 asset markets to examine market behavior when traders have divergent and imperfect information. Each market consists of well-informed (WI) and less-informed (LI) agents. Nine markets each are conducted in Canada, China, and the US. We find that WI agents’ private information is partially, but not fully, reflected in prices. We also document cross-country differences in the degree to which private information is reflected in prices. Lastly, we find that WI agents are able to exploit their informational advantage and outperform LI agents. This result holds across countries.