Title:

Circuit Breakers with Uncertainty about the Presence of Informed Agents : I Know What You Know . . . I Think, Working Paper 2002-25

PREVIOUS | NEXT

Circuit Breakers with Uncertainty about the Presence of Informed Agents : I Know What You Know . . . I Think, Working Paper 2002-25

DATE: December 2002

PART OF: AUTHORS:

ABSTRACT: This study conducts experimental asset markets to examine the effects of circuit breaker rules on market behavior when agents are uncertain about the presence of private information. Our results unequivocally indicate that circuit breakers fail to temper unwarranted price movements in periods without private information. Agents appear to mistakenly infer that others possess private information, causing price to move away from fundamental value. Allocative efficiencies in our markets are high across all regimes. Circuit breakers perform no useful function in our experimental asset markets.

Download (pdf) View Full Text

Share this page:


Diversity is critical to the Federal Reserve, and we are firmly committed to fostering a diverse and inclusive culture throughout the Federal Reserve System. Collections within FRASER contain historical language, content, and descriptions that reflect the time period within which they were created and the views of their creators. Certain collections contain objectionable content—for example, discriminatory or biased language used to refer to racial, ethnic, and cultural groups. These viewpoints and attitudes are inconsistent with our values, but the original descriptions are retained to ensure that they are not erased from the historical record.
Save & Share
less

Federal Reserve Bank of Atlanta. "Circuit Breakers with Uncertainty about the Presence of Informed Agents : I Know What You Know . . . I Think, Working Paper 2002-25" in Working Papers (Federal Reserve Bank of Atlanta) (December 2002). https://fraser.stlouisfed.org/title/8586/item/656767, accessed on July 27, 2024.

More Information
less

NOTE: Keywords: circuit breaker, experimental asset markets, trading interruption, private information

Published in Financial Markets, Institutions and Instruments, August 2005

SUBJECTS: THEMES: CLASSIFICATION:
  • jel: D82; G18
Metadata (XML)
Metadata (JSON)