Bubble Formation and (In)efficient Markets in Learning-to-Forecast and -Optimize Experiments
This experiment compares the price dynamics and bubble formation in an asset market with a price adjustment rule in three treatments where subjects (1) submit a price forecast only, (2) choose quantity to buy/sell and (3) perform both tasks. We find that bubbles emerge in all these treatments, but to a larger degree in treatment (2) and (3). Our result confirms that bubble formation is a robust finding in markets with positive expectation feedback. We also find some repeated ``super bubbles'' where the price is 3 times larger than the fundamental value, which were not seen in former experiments.
Year of publication: |
2014
|
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Authors: | Bao, T. ; Hommes, C.H. ; Makarewicz, T.A. |
Institutions: | Center for Nonlinear Dynamics in Economics and Finance (CeNDEF), Faculteit Economie en Bedrijfskunde |
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