Our market experiment investigates the extent to which traders learn from the price, differentiating between situations where orders are submitted before versus after the price has realized. When market participants have to submit their bids conditional on the price, they show a bias by reacting...

We study the prices of a firm's debt and equity in a market where investors have private information and may exhibit differences of opinion. We show how debt and equity valuations, and the impact of public information and distress risk on these valuations, depend upon disagreement and the...