Super-Exponential Bubbles in Lab Experiments: Evidence for Anchoring Over-Optimistic Expectations on Price

Andreas D. Huesler, Didier Sornette and Cars Hommes
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Andreas D. Huesler: ETH Zürich
Didier Sornette: ETH Zürich and Swiss Finance Institute

No 12-20, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster than exponential due to positive feedback. We show that the positive feedback operates by traders continuously upgrading their over-optimistic expectations of future returns based on past prices rather than on realized returns.

Keywords: rational expectations; financial bubbles; speculation; anchoring; laboratory experiments; behavioral model; super-exponential growth; positive feedback; behavioral expectations (search for similar items in EconPapers)
JEL-codes: C92 D84 G12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-05
New Economics Papers: this item is included in nep-exp
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Related works:
Journal Article: Super-exponential bubbles in lab experiments: Evidence for anchoring over-optimistic expectations on price (2013)
Working Paper: Super-exponential bubbles in lab experiments: evidence for anchoring over-optimistic expectations on price (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1220

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