Suckers Are Born but Markets Are Made: Individual Rationality, Arbitrage, and Market Efficiency on an Electronic Futures Market
研究爱荷华电子市场中两类交易者的行为差异，发现做市商比价格接受者更少犯错、更理性，解释了为何大量非理性交易者存在时市场仍能有效定价。
The Iowa Electronic Markets are specially designed futures markets that appear to aggregate information efficiently to predict events such as election outcomes. Yet, in theory, perfect information aggregation is impossible. Further, the markets are populated by a nonrepresentative sample of mistake-prone and biased traders. That is, traders are prone to the behavioral anomalies predicted by behavioral finance. How can this be reconciled with market efficiency? Here, we take a first step by analyzing the behavior of two self-selected types of traders. Dramatic differences in mistake rates across traders can help us answer the question. Market-making traders who set prices are less mistake prone and appear to be more rational than price-taking traders. This highlights an important feature of markets: marginal (in this case, market making), not average, traders set prices. This can drive the efficiency of market prices in spite of large numbers of traders who display patently suboptimal behavior.