The effects of intelligence on price discovery and market efficiency

The influence of speculation on market performance has long been discussed. Under the framework of bounded rationality in which traders are endowed with different intelligence levels in terms of different learning styles or different representations of intelligence, we examine the effects of traders’ intelligence on price discovery based on “intraday” data, and market efficiency. We find that intelligence does help improve market performance. However, the influence of different intelligence levels on the market crucially depends on the characteristics of learning styles or the representation of intelligence.