Is the Usefulness Approach Useful? Some Reflections on the Utility of Public Information

Experimental asset markets with endogenous choice of costly asymmetric information

“…Rather, by finding a J-shaped pattern of gross abnormal returns we accept the alternative hypothesis that there are differences across information levels. This finding is in line with earlier studies by Schredelseker (2001) and Huber (2007) and only partly confirms theoretical predictions of Grossman and Stiglitz (1980), since the latter analyse only two information levels. Turning to net abnormal returns (bottom panel of Table 2), the pattern changes: only the uninformed traders outperform the market in all treatments (two of them significantly), while most of the coefficients of the other information levels are significantly negative.…”

Is more information always better?

“…Treatment T1 is motivated by the argument of Schredelseker (1984) and based on the model developed in Schredelseker (2001). Since prices are only ex-post observable in T1, the results in T1 might be affected by this feature of the market.…”

“…The trader with information 6 In Section 3.1.2, we will come back to this issue of skewed signals in the context of our experimental market. Schredelseker (2001) provides a simulation on the effects of skewed signals for trading profits in a market with cumulative information. Schredelseker claims that at least one equilibrium of strategies should exist where each trader chooses his best response to other trader's actions.…”

On the negative value of information in informationally inefficient markets: Calculations for large number of traders

“…The model, which was proposed by Schredelseker (2001), simulates a one-period pure exchange economy in which only one security is traded. In each run of the simulation, let the security value V (intrinsic value) be the sum of n Laplace coins ðX 1 ; .…”

“…Recent developments, however, contradict this paradigm. Schredelseker [Schredelseker, K., 2001. Is the usefulness approach useful?…”