Price patterns in experimental asset markets with long horizon

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8 Scopus citations

Abstract

We investigate the generality of the bubble and crash price pattern observed in previous asset market experiments. The deviation of prices from fundamental values can be explained by either a failure of subjects to backward induct, a learning effect, or some other explanation. We conduct experiments with a longer horizon of 200 periods to find a possible reason for the timing of the crash. If the reason for the crash is the inability of subjects to backward induct, a long bubble should be observed. If, on the other hand, it is a learning effect, then the crash should occur after approximately 13 periods. Our results show that while prices generally deviate from fundamental values, price patterns are different than in the 15-period markets, featuring multiple bubbles and crashes.

Original languageEnglish
Pages (from-to)20-28
Number of pages9
JournalJournal of Behavioral Finance
Volume12
Issue number1
DOIs
StatePublished - 1 Dec 2011

Keywords

  • Bubbles and crashes
  • Experimental asset markets
  • Price formation
  • Price patterns

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