Are asset markets efficient? Evidence from Economic experiments
Vestnik of the St. Petersburg University. Series 5. Economics Вестник Санкт-Петербургского университета. Серия 5. Экономика, 2014, issue 1, 91-104
The assumed superiority of market economy compared with central planning is based on the belief that markets are able to aggregate disperse information about production costs and demand of goods in the form of efficient market prices. Asset markets and futures markets for commodities and assets are believed to evaluate expected future developments as far as this is possible in the face of fundamental uncertainties. Market failure exists (e.g. because of market power or externalities) and has to be counteracted by state intervention (e.g. cartel authorities or Pigou taxes), but, in principle, free markets are assumed to be the optimal institution. Is this always true, in particular also for asset markets which seem to have a tendency to inflate “bubbles” for which there are many large scale examples? Experimental investigations of asset markets show that, in most cases, market prices “ultimately” converge to optimal Rational Expectation prices. Markets are able to aggregate disperse information, but this process needs time and also the systematic occurrence of biases, in particular bubbles, is reported. The most important determinant for the prevention of bubbles is personal experience.
Keywords: РЫНКИ АКТИВОВ; ASSET MARKETS; ЭФФЕКТИВНОСТЬ; EFFICIENCY; ТЕОРИЯ РАЦИОНАЛЬНЫХ ОЖИДАНИЙ; RATIONAL EXPECTATIONS; ЭКСПЕРИМЕНТАЛЬНЫЕ ИССЛЕДОВАНИЯ; EXPERIMENTAL RESEARCH (search for similar items in EconPapers)
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