Dividend timing and behavior in laboratory asset markets
Mark Van Boening,
Vernon Smith and
Charissa P. Wellford
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Charissa P. Wellford: Federal Trade Commission, Bureau of Economics S-5013, 600 Pennsylvania Avenue NW,Washington, DC 20580, USA
Economic Theory, 2000, vol. 16, issue 3, 567-583
This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten "A1" markets, a single dividend is paid at the end of the trading horizon. In nine "A2" markets, dividends are paid at the end of each trading period. In seven "A3" markets, some of the dividends are paid at the end of the trading horizon, and the rest are paid on a per-period basis. The results indicate that price bubbles are most likely in A2 markets, less likely in A3 markets, and least likely in A1 markets. Six distinct hypotheses are considered. The data suggest that the concentration of dividend value at a single point in time helps to create common expectations, and thus significantly reduce the incidence of bubbles. Also, the results underscore the difficulty facing econometric tests on field data where fundamental value has to be approximated.
Keywords: Price bubbles; Asset market experiments; Expectations. (search for similar items in EconPapers)
JEL-codes: C92 D84 G12 (search for similar items in EconPapers)
Note: Received: May 5, 1999; revised version: April 13, 2000
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