Title

Are Online Auction Markets Efficient? An Empirical Study of Market Liquidity and Abnormal Returns.

Publication Type

Journal Article

Publication Date

5-2009

Abstract

Technological advances have facilitated investment in collectibles through online auction markets, where information regarding product characteristics, current and historical prices, and product availability is available to millions of market participants. However, market inefficiencies may still exist, where prices do not reflect market information and where savvy speculators can profit. Using unit root and variance ratio tests, we examine 8538 rare stamp and 56,997 rare coin auctions to evaluate the efficiency of online markets. In particular, we study market liquidity, abnormal returns and weak-form efficiency. We find an inverse relationship between market efficiency and liquidity. Bidder competition intrinsic to liquidity increases the chances that uninformed bidders drive up item prices, leading to the observed market inefficiencies. (C) 2009 Elsevier B.V. All rights reserved

Keywords

Abnormal returns, Coins, Electronic markets, Financial economics, Market efficiency, Liquidity, Stamps, Thin markets, Unit roots, Variance ratio

Discipline

Numerical Analysis and Scientific Computing

Research Areas

Data Management and Analytics

Publication

Decision Support Systems

Volume

48

Issue

1

First Page

3

Last Page

13

ISSN

0167-9236

Identifier

10.1016/j.dss.2009.05.009

Publisher

Elsevier

Copyright Owner and License

ELSEVIER SCIENCE BV

This document is currently not available here.

Share

COinS