Are online auction markets efficient? An empirical study of market liquidity and abnormal returns

摘要

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.