Speculation and Price Indeterminacy in Financial Markets: An Experimental Study
Thomas Stockl and
Shyam Sunder ()
Additional contact information
Shinichi Hirota: School of Commerce, Waseda University
Juergen Huber: Dept. of Finance, University of Innsbruck
Thomas Stockl: Dept. of Banking and Finance, University of Innsbruck
No 2134, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
To explore how speculative trading influences prices in financial markets we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) as well as dividend-collecting investors. We find that in markets with only speculating investors (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) the “mispricing” is likely to be strategic and not irrational; (iv) mispricing increases with the number of transfers until maturity; and (v) speculative trading pushes prices upward (downward) when liquidity is high (low).
Keywords: Experimental finance; Speculation; Rational expectations; Price efficiency; Price bubbles; Overlapping generations; Backward and forward induction (search for similar items in EconPapers)
JEL-codes: C91 G11 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2134
Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.
Access Statistics for this paper
More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Regan ().