Asset Bubbles without Dividends - An Experiment

Jörg Oechssler, Carsten Schmidt and Wendelin Schnedler

No 439, Working Papers from University of Heidelberg, Department of Economics

Abstract: Bubbles in asset markets have been documented in numerous experimental studies. However, all experiments in which bubbles occur pay dividends after each trading day. In this paper we study whether bubbles can occur in markets without dividends. We investigate the role of two features that are present in real markets. (1) The mere possibility that some traders may have inside information, and (2) the option to communicate with other traders. We find that bubbles can indeed occur without dividends. Surprisingly, communication turns out to be counterproductive for bubble formation, whereas the possibility of inside information is, as expected, crucial.

Keywords: asset markets; bubbles; experiment; mirages; dividends (search for similar items in EconPapers)
JEL-codes: C92 D8 G12 (search for similar items in EconPapers)
Date: 2009-05-12
New Economics Papers: this item is included in nep-exp and nep-mst
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
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Related works:
Working Paper: Asset bubbles without dividends: an experiment (2007)
Working Paper: Asset Bubbles without Dividends - An Experiment (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:awi:wpaper:0439

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