Capital constraints and asset bubbles: An experimental study
Lee A. Coppock,
Daniel Q. Harper and
Charles Holt ()
Journal of Economic Behavior & Organization, 2021, vol. 183, issue C, 75-88
This paper evaluates the effects of credit constraints in an asset market experiment with present value considerations induced by interest payments on cash. All markets exhibit price bubbles, with peak prices exceeding the present value of dividends and redemptions by 30–130%. Starting with a baseline condition (low income, tight credit), a relaxation of credit constraints generates significantly higher price bubbles. A price increase of similar magnitude results from an increase in exogenous income, holding credit tightness constant.
Keywords: Asset prices; Bubbles; Speculation; Leverage; Margin requirements (search for similar items in EconPapers)
JEL-codes: C92 D53 D81 G12 G40 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:183:y:2021:i:c:p:75-88
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