Trading Institutions in Experimental Asset Markets: Theory and Evidence

Bulent Guler (), Volodymyr Lugovskyy, Daniela Puzzello and Steven Tucker
Additional contact information
Bulent Guler: Indiana University, https://economics.indiana.edu/

Working Papers in Economics from University of Waikato

Abstract: We report the results of an experiment designed to study the role of trading institutions in the formation of bubbles and crashes in laboratory asset markets. We employ three trading institutions: Call Market, Double Auction and Tâtonnement. The results show that bubbles are significantly smaller in uniform-price institutions than in Double Auction. We reproduce this and other critical patterns of the data by calibrating a heterogeneous agent model with fundamental and myopic-noise traders. The model produces larger bubbles under Double Auction because multiple trades occur within a period, amplifying the impact of myopic traders with positive bias on transaction prices.

Keywords: experimental asset markets; bubbles; traders' heterogeneity; trading institutions (search for similar items in EconPapers)
JEL-codes: C90 C91 D03 G02 G12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-12-21
New Economics Papers: this item is included in nep-cwa, nep-exp and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.its.waikato.ac.nz/wai/econwp/2115.pdf (application/pdf)

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:wai:econwp:21/15

Access Statistics for this paper

More papers in Working Papers in Economics from University of Waikato Private Bag 3105, Hamilton, New Zealand, 3240. Contact information at EDIRC.
Bibliographic data for series maintained by Geua Boe-Gibson ().