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Market-Based Corrective Actions: An Experimental Investigation (Davis D., Prescott E. S., Korenok O.)

Information Asymmetry and Transparency Regulation

Abstract We report results from an experiment that evaluates the consequences of having a socially motivated monitor use the market price of a bank's traded assets to decide whether or not to intervene in the bank's operations. Consistent with predictions of a recent theoretical paper by Bond, Goldstein, and Prescott (2009, "BGP"), we find that a possible value-increasing intervention weakens the informational efficiency of markets and that the monitor commits numerous intervention errors. Not anticipated by BGP, we find that a possible value-decreasing action also affects market performance. Further, in both cases the active monitor undermines allocative efficiency, particularly for market fundamentals close to the efficient intervention cutoff.
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Libref/ Davis D., Prescott E. S., Korenok O. (2011) "Market-Based Corrective Actions: An Experimental Investigation", Federal Reserve Bank of Richmond Working Paper No. 11-01, pp. 1 - 38
© Программирование — Александр Красильников, 2008
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