Coordination on bubbles in large-group asset pricing experiments

Te Bao, Myrna Hennequin, Cars Hommes and Domenico Massaro

Journal of Economic Dynamics and Control, 2020, vol. 110, issue C

Abstract: We present a large-group experiment in which participants predict the price of an asset, whose realization depends on the aggregation of individual forecasts. The markets consist of 21 to 32 participants, a group size larger than in most experiments. Multiple large price bubbles occur in six out of seven markets. The bubbles emerge even faster than in smaller markets. Individual forecast errors do not cancel out at the aggregate level, but participants coordinate on a trend-following prediction strategy that gives rise to large bubbles. The observed price patterns can be captured by a behavioral heuristics switching model with heterogeneous expectations.

Keywords: Experimental economics; Asset price bubbles; Heterogeneous expectations; Heuristics switching (search for similar items in EconPapers)
JEL-codes: C92 D84 G12 G41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188919300880
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:dyncon:v:110:y:2020:i:c:s0165188919300880

DOI: 10.1016/j.jedc.2019.05.009

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().