Abstract:

This paper presents an experiment on theory of efficient financial market run in a classroom of advanced financial theory in the degree on Business and Administration. The experimental design follows Park (2011). We introduce two major differences regarding Park’s work. The first one related to the development of the call double auction market: students played four consecutive trading sessions of five minutes each, and before and after trading they updated their beliefs to give an estimate on the fundamental value of the traded asset. Students’ estimates allow us to construct the demand and supply curves, and compute the corresponding clearing market price. The second one related to the discussion of results from experimental session. Students were asked to answer two questionnaires about the topic of the experiment and declare the level of self-confidence on their own scoring. It was very useful to guide the discussion and reinforce students’ learning.

Keywords:

Efficient financial market, information aggregation, trading, rational expectations, winner’s course.