Asset Legitimacy in Experimental Asset Markets
Debapriya Jojo Paul,
Julia Henker and
Journal of Behavioral Finance, 2015, vol. 16, issue 2, 183-198
We investigate whether prices in experimental asset markets behave differently when participants are required to trade with earned wealth compared to unearned wealth. Unearned endowed wealth, the standard practice in experimental studies of asset price bubbles, may elicit greater than normal risk-seeking behavior. We test for this altered behavior by requiring some participants to earn their initial market allocation. We do not find a significant difference in the frequency, severity, or duration of mispricing between earned and unearned endowments. Our results confirm the validity of the existing methodologies used in the study of bubbles in experimental settings.
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