Bubble or no Bubble - The Impact of Market Model on the Formation of Price Bubbles in Experimental Asset Markets
J?rgen Huber () and
Thomas St?ckl ()
Working Papers from Faculty of Economics and Statistics, University of Innsbruck
For the past two decades a market model introduced by Smith, Suchanek, and Williams (1988, henceforth SSW) has dominated experimental research on financial markets. In SSW the fundamental value of the traded asset is determined by the expected value of a finite stream of dividend payments. This setup implies a deterministically falling fundamental value with a predetermined end of the life-span of the asset and extremely high dividend-payouts. We present a new market model in which we implement the fundamental value by adopting a random walk process. Compared to SSW-markets, prices in the new markets (SAVE) are more efficient and end-of-experiment imbalances common in SSW-markets are not observed. Our results demonstrate, that implicit features of the SSW market model contribute to bubble formation.
Keywords: Experimental economics; asset market; bubble; market efficiency (search for similar items in EconPapers)
JEL-codes: C92 D83 D84 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-mic
References: Add references at CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:inn:wpaper:2009-26
Access Statistics for this paper
More papers in Working Papers from Faculty of Economics and Statistics, University of Innsbruck Contact information at EDIRC.
Series data maintained by Janette Walde ().