The power of words in financial markets: soft versus hard communication,a strategy method experiment

Brice Corgnet (), Angela Sutan and Arvin Aashta ()
Authors registered in the RePEc Author Service: Arvind Ashta ()

Labsi Experimental Economics Laboratory University of Siena from University of Siena

Abstract: The main objective of this paper is to analyze the impact of non-informative communications on asset prices. An experimental approach allows us to control for the release of non-relevant messages. We introduce the release of messages in standard experimental asset markets with bubbles (Smith, Suchanek and Williams 1988) through a strategy method experiment. We conjecture that a priori uninformative messages can significantly impact the level of asset prices. Uninformative communications may be used by boundedly rational subjects to compute the fundamental value of the asset. In addition, rational agents may anticipate such an effect and adapt their strategy to the messages received. We asked 182 subjects to construct strategies about their action in a standard experimental asset market environment. Our analysis sheds light on the possibility of manipulation and stabilization of financial markets by influential agents such as financial “gurus” or central bankers.

Keywords: experiment (search for similar items in EconPapers)
JEL-codes: C90 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe and nep-exp
Date: 2006-06
View list of references

Downloads: (external link)
http://www.econ-pol.unisi.it/labsi/labsi_paper/labsi6.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:usi:labsit:006

Access Statistics for this paper

More papers in Labsi Experimental Economics Laboratory University of Siena from University of Siena
Contact information at EDIRC.
Series data maintained by Alessandro Innocenti ().