Anchoring in experimental asset markets

Sascha Baghestanian and Todd Walker

No 54, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets. We show that setting a visual anchor at the fundamental value (FV) in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets. If no FV-anchor is set, bubble-crash patterns emerge. Our results indicate that bubbles in laboratory environments are primarily sparked in the first period. If prices are initiated around the FV, they stay close to the FV over the entire trading horizon. Our insights can be related to initial public offerings and the interaction between prices set on pre-opening markets and subsequent intra-day price dynamics.

Keywords: Experimental Asset Markets; Anchoring; Bubbles (search for similar items in EconPapers)
JEL-codes: C90 C91 D03 G02 G12 (search for similar items in EconPapers)
Date: 2015, Revised 2015
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 (11)

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Journal Article: Anchoring in experimental asset markets (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:54

DOI: 10.2139/ssrn.2456941

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