Bubbles, crashes and information contagion in large-group asset market experiments

Cars Hommes, Anita Kopányi-Peuker and Joep Sonnemans ()

Experimental Economics, 2021, vol. 24, issue 2, No 3, 414-433

Abstract: Abstract We study the emergence of bubbles in a laboratory experiment with large groups of individuals. The realized price is the aggregation of the forecasts of a group of individuals, with positive expectations feedback through speculative demand. When prices deviate from fundamental value, a random selection of participants receives news about overvaluation. Our findings are: (i) large asset bubbles are robust in large groups, (ii) information contagion through news affects behaviour and may break the coordination on a bubble, (iii) time varying heterogeneity provides an explanation of bubble formation and crashes, and (iv) bubbles are strongly amplified by coordination on trend-extrapolation.

Keywords: Experimental finance; Expectation formation; Learning to forecast; Financial bubbles (search for similar items in EconPapers)
JEL-codes: C91 C92 D53 D83 D84 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://link.springer.com/10.1007/s10683-020-09664-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Bubbles, crashes and information contagion in large-group asset market experiments
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:kap:expeco:v:24:y:2021:i:2:d:10.1007_s10683-020-09664-w

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10683/PS2

DOI: 10.1007/s10683-020-09664-w

Access Statistics for this article

Experimental Economics is currently edited by David J. Cooper, Lata Gangadharan and Charles N. Noussair

More articles in Experimental Economics from Springer, Economic Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().