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We study the role of experience in the formation of asset price bubbles. Therefore, we conduct two related experiments. One is a call market experiment in which participants trade assets with each other. The other is a learning-to-forecast experiment in which participants only forecast future...
Persistent link: https://www.econbiz.de/10011932581
In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...
Persistent link: https://www.econbiz.de/10011805975
Greed has been shown to be an important economic motive. Both the popular press as well as scientific papers have mentioned questionable practices by greedy bankers and investors as one of the root causes of the 2008 global financial crisis. In spite of these suggestions, there is as of yet no...
Persistent link: https://www.econbiz.de/10013242440
By now there are hundreds of scientific articles on experimental asset markets. Almost all of these experiments use a short and definite horizon. This may be one of the starkest differences to financial asset markets outside the laboratory, which usually have indefinite and comparatively long...
Persistent link: https://www.econbiz.de/10012609733
By now there are hundreds of scientific articles on experimental asset markets. Almost all of these experiments use a short and definite horizon. This may be one of the starkest differences to financial asset markets outside the laboratory, which usually have indefinite and comparatively long...
Persistent link: https://www.econbiz.de/10013192083
We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, it is possible to hold more than one (small-r) “rational” expectation. When rational...
Persistent link: https://www.econbiz.de/10012919580
Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. The consequences of social interactions are hard to isolate in financial data, and theoretically it is not clear whether peer effects should increase...
Persistent link: https://www.econbiz.de/10010411254
One possible determinant of overpricing on asset markets is a lack of self-control abilities of traders. Self-control is the individual capacity to override or inhibit undesired behavioral tendencies such as impulses and to refrain from acting on them. We implement the first experiment that is...
Persistent link: https://www.econbiz.de/10011438254
One explanation for overpricing on asset markets is a lack of traders' self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and...
Persistent link: https://www.econbiz.de/10011899248
We experimentally investigate how price expectations are formed in a large asset market where subjects' only task is to forecast the future price of a risky asset. The realized prices depend on these expectations. We observe small (6 participants) and large markets (about 100 participants). In...
Persistent link: https://www.econbiz.de/10011979625