TY  - JOUR
AU  - Alevy,Jonathan E.
AU  - Haigh,Michael S.
AU  - List,John
TI  - Information Cascades: Evidence from An Experiment with Financial Market Professionals
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12767
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12767
L1  - http://www.nber.org/papers/w12767.pdf
N1  - Author contact info:
Jonathan E. Alevy
University of Alaska Anchorage
E-Mail: afja@uaa.alaska.edu

Michael S. Haigh
U.S Commodity Futures Trading Commission
1155 21st Street NW
Washington, DC 20581
E-Mail: mhaigh@cftc.gov

John List
Department of Economics
University of Chicago
1126 East 59th
Chicago, IL 60637
Tel: 301/405-1288
Fax: 301/314-9091
E-Mail: jlist@uchicago.edu
AB  - Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects.  We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment.  As a baseline, we compare their behavior to student choices in similar treatments.  We further examine whether, and to what extent, cascade formation is influenced by both private signal strength and the quality of previous public signals, as well as decision heuristics that differ from Bayesian rationality.  Analysis of over 1,500 individual decisions suggests that CBOT professionals are better able to discern the quality of public signals than their student counterparts.  This leads to much different cascade formation.  Further, while the behavior of students is consistent with the notion that losses loom larger than gains, market professionals are unaffected by the domain of earnings.  These results are important in both a positive and normative sense.
ER  -