Asset-holdings caps and bubbles in experimental asset markets
Volodymyr Lugovskyy (),
Daniela Puzzello (),
Steven Tucker () and
Arlington Williams ()
Journal of Economic Behavior & Organization, 2014, vol. 107, issue PB, 781-797
We report the results of an experiment designed to study the effect of individual asset-holdings restrictions on the formation of bubbles and crashes in laboratory asset markets. Bubbles and crashes are a quite robust phenomenon in experimental settings. Motivated by demand-control policies employed in the Chinese real-estate market, we explore the effects of permanent and short-term caps on individual asset holdings. We find that permanent caps greatly reduce positive bubbles, but tend to generate negative bubbles in later periods. Under short-term caps, on the other hand, neither positive nor negative bubbles are observed. Our results indicate that asset-holdings caps can be effective in eliminating bubbles if properly designed.
Keywords: Experimental asset markets; Bubbles; Asset-holdings caps (search for similar items in EconPapers)
JEL-codes: C90 D03 G02 G12 G18 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pb:p:781-797
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