آیا داشتن اطلاعات بیشتر، همیشه بهتر است؟: بازارهای مالی تجربی با اطلاعات انباشته شده

We study the value of information in financial markets by asking whether having more information always leads to higher returns. We address this question in an experiment where information about an asset's intrinsic value is cumulatively distributed among traders. We find that only the very best informed traders (i.e., insiders) significantly outperform less informed traders. However, there is a wide range of information levels (from zero information to above average information levels) where additional information does not yield higher returns. The latter result implies that the value of additional information need not be strictly positive.

This paper addresses the question whether having more information than others is always advantageous when trading on financial markets. More precisely, we study whether traders who are better informed about the intrinsic value of an asset can expect to earn higher returns than traders with less information. If the answer to that question were positive, then we might conclude that having more information has generally a positive marginal benefit. In individual decision-making tasks this is typically the case, as has already been pointed out by Blackwell (1951). However, in an interactive context such as trading on financial markets, the answer to our question is less obvious and might not necessarily be positive for all information levels. Game theory, for instance, shows that “having more information (or, more precisely, having it known to other players that one has more information) can make the player worse off” (Gibbons, 1992, p. 63).1 We will present an experimental study to examine the marginal value of additional information for traders in financial markets. Traders will have different levels of information about the intrinsic value of a tradable asset. The distribution of information is cumulative, meaning that a better informed trader knows everything that a less informed trader knows, plus a little extra. By implementing such a cumulative information system and holding all other conditions constant, it is possible to analyze the marginal value of additional information. The two features of: (i) considering more than two different information levels and (ii) having a cumulative information system distinguish our paper from almost all previous studies. Most experimental papers on the value of information have considered two distinct information levels only, showing that informed traders outperform uninformed ones (see, e.g., Copeland and Friedman, 1992 and Ackert et al., 2002). Yet two information levels (in particular in the binary context of informed versus uninformed traders) are not enough to conclude that more information is always better. There are several theoretical papers on the value of information when more than two traders have different information. These models, which will be related more specifically to our paper in Section 2, are typically characterized by a combination of public information about an asset and private information, with the latter being idiosyncratic for each trader. Although these models provide very useful insights into asset pricing, they are not suitable for answering the question of whether more information leads to better results (in terms of trading profits) than less information, because no trader has more information than another trader in these models, just different information. This led Figlewski (1982, p. 99) to claim that “independent information is not likely to be an adequate description of the information structure of a real-world speculative market”. Rather, we think it is more realistic to assume that information is cumulatively distributed, meaning that some traders know more than others by having the same plus some extra information. For instance, there may be some investors relying exclusively on information from newspapers or TV. Such information is, of course, also available to better informed investors who also take into account companies’ fundamentals such as their public financial statements or revenue outlook. Finally, there may be some very well-informed traders (insiders) having all the previously mentioned information, but also knowing some important details (such as a planned merger or a product innovation) that are not publicly known. Given that there is no empirical evidence on the value of additional information when information is cumulatively distributed, we have opted for an experimental approach. In the laboratory we are able to control carefully a trader's information about the value of an asset. In particular, we can easily assign to single traders different levels of information in a cumulative way, such that better informed traders know everything that less informed traders know, plus an additional amount. By implementing such a cumulative information system and holding all other conditions constant, we can track down the marginal value of additional information. The rest of the paper is organized as follows. In Section 2, we will relate our research question to the literature on the value and on the processing of information in markets. Section 3 presents our experimental study. Section 4 offers a concluding synopsis.

We have studied in an experiment the value of additional information in financial markets. The combination of two specific features of our experiment distinguishes our paper from previous ones. First, we consider more than two information levels. Second, we use a cumulative information system. Both features seem to mirror the conditions of financial markets quite reasonably. It is particularly the second feature that we deem important because very well-informed traders can be expected to have at least a good guess of what less informed traders know (from newspapers, TV, corporate reports, etc.). Though our three experimental treatments T1, T2 and T3 differ in some notable ways, their main results are remarkably similar, indicating that the results are not driven by some peculiarities of a particular treatment. The most important result is the fact that more information is not always better for traders on financial markets, even though it pays to have insider (i.e., far above average) information. Whereas the benefit of insider information has been documented before, our design and analysis provides the first evidence that there is a broad range of information levels (ranging from basically uninformed traders to traders with an average information level) where additional information does not lead to higher returns or profits from trading. Of course, we should stress that we have not found that having more information leads to significantly lower returns or profits. This latter finding is clearly inconsistent with the model of Schredelseker (1984) that would predict that additional information can, in fact, be harmful. Given that our findings have proved robust in three different experimental markets, 28 the difference between Schredelseker's model and our results does not seem to depend on the type of market. Rather, it might be that the number of participants is critical. In markets with a large number of traders in which the price and an unbiased estimate of the value of an asset are known, Schredelseker's theory may hold because the uninformed traders can always buy or sell at the market price and make zero expected profits. In all of our markets, however, we have found that uninformed traders actually suffer losses. This could have been due to the fact that in our markets with relatively few participants any bid introduces some noise in the price, which is then no longer an unbiased estimate of the asset's value. Nevertheless, we deem it an important finding that more information does not lead to higher returns or profits in a wide range of information levels. This result seems to be related to the market as an institution where traders take bets with other traders on the future development of a stock price (besides taking into account the current fundamentals such as profits or revenue). Medium informed traders may have some information, but they often take bets against even better informed traders, thereby losing money quite frequently. The information that medium informed traders get may also be rather skewed, causing a bias in the conditional expectation of the asset's value. Completely uninformed traders cannot suffer from such a bias, given that they have no information. Seen from this perspective, it even might seem surprising that medium informed traders did not perform significantly worse than uninformed traders. This might be due to medium informed traders knowing the possible distribution of values (in treatments T1 and T2) and becoming aware of the fact that their partial information might be misleading. The latter conjecture can be supported by the observation that trading becomes less active in the latter part of the experiment. More generally, our key result on the (often zero) value of additional information seems to question the widespread assumption that having more information is always a good thing, even in a world where information is costless, as we have assumed throughout the paper. Actually, the introduction of positive marginal costs for additional information can be expected to strengthen our results that having more information need not be positive for a trader's overall profits (including information costs). However, we leave it open for future research to corroborate this conjecture.