Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company's sales to movie box office receipts. Recent research suggests prediction...

Many argue that under- and over-reaction in asset prices are caused by inherently different factors. We design an asset market where information arrives sequentially over time to investigate the sources of these phenomena. We find that prices react insufficiently to news surprises and...