Short Sale Constraints, Divergence of Opinion and Asset Values: Evidence from the Laboratory

Gerlinde Fellner-Röhling () and Erik Theissen

Labsi Experimental Economics Laboratory University of Siena from University of Siena

Abstract: The overvaluation hypothesis (Miller 1977) predicts that a) stocks are overvalued when there are short selling restrictions and that b) the overvaluation is increasing in the degree of divergence of opinion. We design an experiment that allows us to test these predictions in the laboratory. Our results support the hypothesis that prices are higher in the presence of short selling constraints. The overvaluation does not depend on the degree of divergence of opinion.

Keywords: overvaluation hypothesis; short selling constraints; divergence of opinion (search for similar items in EconPapers)
JEL-codes: C92 G14 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:usi:labsit:009

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