Title: How market prices react to information: Evidence from a natural experiment

Presenter: Lionel Page, University of Technology, Sydney

Time: 10-11:15am

Zoom link: https://uqz.zoom.us/j/93284633381

Abstract

We study the efficiency of market prices' reaction to information shocks. We use a natural experiment setting on binary option markets: we compare the evolution of market prices in situations where the occurrence or not of an information shocks depends on knife-edge situations and where the shock can be considered as good as random. We find that most of the time, prices react surprisingly efficiently to information shocks with no evidence of abnormal average returns. We nonetheless find evidence of under-reaction towards the end of the binary option markets, when information shocks are large.

About the presenter

Lionel Page's research links insights from economic theory (theory of decision and game theory) and from other behavioural sciences such as psychology. Part of his work looks into fundamental aspects of behaviour such as social and risk preferences, and applying these insights to a range of applied economic questions: education decisions, political decisions and financial decisions.

 

 


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