Noise Trading in a Laboratory Financial Market: A Maximum Likelihood Approach
We study the extent to which, in a laboratory …nancial market, noise trading can stem from subjects' irrationality.We estimate a structural model of sequential trading by using experimental data.In the experiment, subjects receive private information on the value of an asset and trade it in sequence with a market maker.We …nd that, in the laboratory, the noise due to the irrational use of private information