Peter_McCluskey2 comments on Buy Now Or Forever Hold Your Peace - Less Wrong

21 Post author: Eliezer_Yudkowsky 04 February 2008 09:42PM

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Comment author: Peter_McCluskey2 06 February 2008 05:58:30PM 0 points [-]

Hal, I expect that fully rational traders would produce larger bid/ask spreads when the results are being announced, and trading volume that is closer to what is suggested by the No Trade Theorem. Traders have a widespread bias to overestimate their ability to profit from following news. For example, see an experiment done by Andreassen where subjects trading stocks did worse if they saw a constant stream of news than if they saw no news once they started trading.