This paper examines the ability of markets to aggregate information so that the price generated from the market contains the best estimate of all the available information. The paper investigates how individuals “update” their initial beliefs from their public and private information in light of market prices. In particular, the paper looks at individuals' weighting of public information versus private information. Also, the volume of information in the market via an increased number of traders with private information has a positive impact on the quality of the market price. Lastly, the personality traits of the traders seem to provide some positive impact if the traders are diverse in terms of the proportion of “efficient and organized” traders in the market.
JEL classification numbers: C91, C92, D82
Keywords: Experimental economics, Prediction markets, Belief, Market efficiency, Personality traits.
ISSN: 1792-7552 (Online)