Cash Inflow and Trading Horizon in Asset Markets
Michael Razen (),
Jürgen Huber () and
Michael Kirchler ()
Working Papers from Faculty of Economics and Statistics, University of Innsbruck
It is conjectured that one of the major ingredients of historic financial bubbles was the inflow of money in various forms. We run 36 laboratory asset markets and investigate the joint effect of cash inflow and trading horizon on price efficiency. We show that only markets with cash inflow and long trading horizon exhibit bubbles and crashes. We also observe that markets with extended trading horizon but without cash inflow and markets with shorter trading horizon do not trigger bubbles. Finally, we report that beliefs about prices and, importantly, about (constant) fundamentals follow bubble patterns as well.
Keywords: experimental finance; cash inflow; trading horizon; backward induction; asset market; price efficiency (search for similar items in EconPapers)
JEL-codes: C92 D84 G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2016-06
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