In an experimental setting in which investors can entrust their money to traders, we investigate how compensation schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At the benefit of a potentially higher return, they can entrust their money...

We investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets. We show that setting a visual anchor at the fundamental value (FV) in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets. If...

Our objective was to conduct an experimental study of investors' reactions in terms of trading volume to the announcement of annual earnings. Shareholders consider annual net income as the most important figure in the announced results since it is the basis for determining profit for individual...

To explore how speculative trading influences prices in financial markets, we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) and dividend-collecting investors. Moreover, we operate markets at two different...

The paper investigates the relation between the risk preferences of traders and the information aggregation properties of an experimental call market. We find evidence inconsistent with the prediction that market-clearing prices are closer to the full revelation of the state when traders are...

We study the emergence of bubbles in a laboratory experiment with large groups of individuals. The realized price is the aggregation of the forecasts of a group of individuals, with positive expectations feedback through speculative demand. When prices deviate from fundamental value, a random...