Overconfidence and Bubbles in Experimental Asset Markets

Julija Michailova and Ulrich Schmidt

Journal of Behavioral Finance, 2016, vol. 17, issue 3, 280-292

Abstract: This paper investigates the relationship between market overconfidence and occurrence of stock-price bubbles. Sixty participants traded stocks in 10 experimental asset markets. Markets were constructed on the basis of subjects' overconfidence: The most overconfident subjects form high overconfidence markets and the least overconfident subjects low overconfidence markets. Prices in low overconfidence markets tend to track the fundamental asset value more accurately than prices in high overconfidence markets and are significantly lower and less volatile. Additionally, we observe significantly higher bubble measures and trading volume in high overconfidence markets. Two possible explanations for these differences are analyzed: While price expectations are significantly higher in high overconfidence markets, no differences in the average degree of risk aversion were detected.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://hdl.handle.net/10.1080/15427560.2016.1203325 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:hbhfxx:v:17:y:2016:i:3:p:280-292

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/hbhf20

DOI: 10.1080/15427560.2016.1203325

Access Statistics for this article

Journal of Behavioral Finance is currently edited by Brian Bruce

More articles in Journal of Behavioral Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().