The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets
A series of experiments illustrate that relaxing short-selling constraints lowers prices in experimental asset markets, but does not induce prices to track fundamentals. We argue that prices in experimental asset markets are influenced by restrictions on short-selling capacity and limits on the cash available for purchases. Restrictions on short sales in the form of cash reserve requirements and quantity limits on short positions behave in a similar manner. A simulation model, based on <link rid="b7">DeLong et al. (1990)</link>, generates average price patterns that are similar to the observed data. Copyright 2006 by The American Finance Association.
Year of publication: |
2006
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Authors: | HARUVY, ERNAN ; NOUSSAIR, CHARLES N. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 61.2006, 3, p. 1119-1157
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Publisher: |
American Finance Association - AFA |
Saved in:
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