Docstoc

Spyros Alogoskoufis _amp; Ann-Renee Guillemette

Document Sample
Spyros Alogoskoufis _amp; Ann-Renee Guillemette Powered By Docstoc
					Experimental Economics 488


 SPYROS ALOGOSKOUFIS &
 ANN-RENÉE GUILLEMETTE
Commodity and Stock Markets

 Initial Experiment
   Age and Experience in Both Markets


 Final Outcome:
   Size Manipulation:
     Small Markets = Commodities
     Large Markets = Stocks
The Question

 Is information incorporated faster and
  more equitably in a small or large market?
Clarification

 How we define “Faster”
   Periods are in terms of transaction numbers and
    not seconds.
   Justification
     Excludes initial confusion
     Compare similar observations - linear relationship
      between average transactions
     Eliminates practical difficulties
Expected Outcomes
 Larger Market More Successful Than Smaller
  Market
   Increased Competition - Breakdown of Collusion
   More Information Available
     By trading at a high volume, more information is
      discovered
   Downside : Speculation of Price
     Traders with information benefit
   Faster Convergence Leads to Minimized Losses
                                                     Instructions
   Market Information
   The experiment will consist of 16 rounds in total. One trial round will precede the
    experiment, in order for participants to familiarize themselves with the program
   Each participant is assigned a group, A or B. In odd rounds, both groups will be in
    the market, whereas in even rounds, groups A and B will alternate. Groups A and
    B are of equal size.
   In each round, certain individuals will randomly have some knowledge of the
    actual value of the good, and other will not.
   Participants will each be given 5 shares. In order to avoid any restrictions on
    trading, there will be an initial endowment of 10,000 given to each trader. He or
    she can trade as much or as little as desired but must not have a negative holding
    of shares at any point during the trading round
   Participants know their values for each round ahead of time. This does not affect
    results as each round is independent.
   If information is given, the tabs will contain a random number between 100 and
    1000, otherwise they will say “no information”. The “noise” of the value given will
    constantly be 40. This means that if the value someone is given is 800, the true
    value of the good is between 760 and 840.
                                    Instructions Cont.
 Trading Program.
 The trial round will allow each participant to familiarize him or
   herself with the computer program being used in the B74 Lab. The Z-
   Tree program allows us to simulate the market. The program is run
   by one main computer and is connected to all other sub-computers.
 Participants will open the program and be directed to a “market”
   screen where trading will take place.
 Traders can place a bidding price to purchase shares from other
   traders or they can place an offering price to sell their own shares. In
   order to take up a trader on his “bid” or “offer” other traders have to
   select “sell” and “buy” respectively.
 No transactions will take place when the market is closed (i.e. when
   the time in the upper right hand corner runs out). At the end of each
   round, an updated screen with ending market conditions will be
   posted. Participants will be able to observe their total gains from
   trading in each round. A time-series graph will show real-time prices.
Data Analysis
 Speed
   Visual - Graphic Representation of Periods
   Numerical - Measure of speed of conversion and
    testing

 Equality
   Profit per transaction
   Overall profit.

 All these observations are comparisons between
  the larger (odd) and smaller (even) markets.
      Graphs: Period 1 & 3
700

600
                                                                       Actual Value: 399

500
                                                                       Ending Value: 424
400
                                                                            Series1
300                                                                         Series2

200

100

  0
      0   10   20    30   40   50             60        70        80

                                1000
                                    900
                                    800
                                    700
                                    600
                                    500                                                                   Series1

          Actual Value: 781         400                                                                   Series2

                                    300
                                    200
          Ending Value: 780
                                    100
                                      0
                                          0        10        20        30       40    50   60   70   80
  Graphs: Period 5 & 7
700

600
                                                                       Actual Value: 648
500
                                                                       Ending Value: 540
400
                                                                       Series1
300                                                                    Series2

200

100

  0
      0      10   20   30     40         50   60        70   80

                                   600


                                   500


                                   400


                                   300                                                           Series1
                                                                                                 Series2
          Actual Value: 484
                                   200


          Ending Value: 499        100


                                     0
                                         0         20             40             60   80   100
Graphs: Period 9 & 11
1200
                                                                 Actual Value: 507
1000


800
                                                                 Ending Value: 450

600                                                              Series1
                                                                 Series2
400


200


  0
       0   10    20      30       40        50        60    70

                      1200


                      1000


                      800


                      600                                                                  Series1
  Actual Value: 872
                                                                                           Series2
                      400
  Ending Value: 700
                      200


                        0
                              0        20        40        60      80      100       120
Graphs: Period 2 and 4
1200
                                                           Actual Value: 694
1000


800                                                        Ending Value: 674
600                                                        Series1
                                                           Series2
400


200


  0
       0   10     20    30       40    50        60

                       700

                       600

                       500

                       400
                                                                                    Series1
                       300                                                          Series2
  Actual Value: 348    200

                       100
  Ending Value: 350
                         0
                             0   5    10    15        20             25   30   35
  Graphs: Period 8 and 10
500
450
                                                           Actual Value: 394
400
350                                                        Ending Value: 408
300
250                                                            Series1

200                                                            Series2

150
100
 50
  0
      0   10      20     30      40        50        60

                       900

                       800

                       700

                       600

                       500
                                                                                        Series1
  Actual Value: 796    400
                                                                                        Series2
                       300
  Ending Value: 360    200

                       100

                         0
                             0   5    10        15        20             25   30   35
Graph: Period 12                       Actual Value: 363

                                       Ending Value: 450
900


800


700


600


500
                                                       Series1

400                                                    Series2


300


200


100


  0
      0   5   10   15   20   25   30     35      40
Speed of Convergence
  Observations:
     Larger markets converge faster in terms of
      average transactions per person
     Convergence: A series of consecutive transactions
      exists, such that individual transactions give a
      price within 10% of the actual value

             Large Market                          Small Market

Round     Convergence Per Participant Round    Convergence Per Participant
      1            23             1.28       2          20             2.22
      3            21             1.17       4          23             2.56
      5            NA              NA        8          12             1.33
      7            13             0.72      10          NA              NA
      9            14             0.78      12          NA              NA
     11            22             1.22

Average           18.6           1.03 Average           18.3           2.04
    Summary of Larger Markets
            Equality
                               Large Markets

  Round        Transactions   ΔTotal   StDev   Δ20     StDev   Δ10     StDev

          1              70     44.9    47.5   33.65     7.1   31.7      5.6

          3              74     77.5   118.9    14.4    17.8     8.9     9.2

          5              70    192.5   118.9   104.4    28.9   110.4    19.9

          7              86     36.2    60.2     8.7     5.1    11.2     5.7

          9              63    104.9   154.0   25.75    31.0     12     15.8

          11             98    132.5   160.1   105.1    75.9    172      0.0

Average                76.8     98.1   109.9    48.7    27.6   57.7      9.4
   Summary of Smaller Markets
            Equality
                              Small Markets

 Round Transactions ΔTotal    StDev     Δ10         StDev     Δ5         StDev

      2          52    95.1     104.7     24.6          6.6    20.0          0.0

      4          33    77.6      90.9         4.5       7.9        2.0       0.0

      8          48    37.5      34.5     29.9        16.7     32.6        17.0

     10          29   344.5     109.0    316.5        65.1    352.0        76.7

     12          37   181.6     109.1    158.5        110.0   169.0        112.8

Average        39.8   147.3      89.6    106.8        41.3    115.1        41.3
Larger markets generate prices
closer to the actual value
Equality (Overall Profits)
 Observations:
   Equality and Profit distribution
     Faster convergence linked to fewer profits
     Profits distributed more equally in larger markets
     Results not significant (observations and outliers)


               Large Market        Small Market
             Round        σ      Round        σ
                1       148.76      2        597.60
                3       107.87      4         81.17
                5       257.27      8         95.39
                7         37.92    10        858.78
                9       509.31     12        986.84
               11       868.17
           Average      321.55 Average       523.96
Limitations

 Number of Rounds
   Time Constraint
   Personal Error in Data
 Knowledge of Z-Tree
   Class Members versus Outside Acquaintances
     Repeated usage of the program leads to better
      execution of its functions
 Focus Issue
   Participants may lose concentration after several
    rounds
Final Thoughts

 Larger Markets are more equitable and
  converge faster than smaller markets
 Possible Causes:
   Increased Competition in terms of people with
    information
   More information available (more likely to cause
    reactions)
 Separating Equality from Speed
   Though highly linked, “faster” does not guarantee
    “more equitably”

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:19
posted:10/19/2012
language:English
pages:21