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Bubbles and Experience: An Experiment

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Author Info
Martin Dufwenberg
Tobias Lindqvist
Evan Moore

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Abstract

We investigate the occurrence of bubble-crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders. We find that even with a minority of experienced traders, bubbles are substantially abated.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 95 (2005)
Issue (Month): 5 (December)
Pages: 1731-1737
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Handle: RePEc:aea:aecrev:v:95:y:2005:i:5:p:1731-1737

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Robert Slonim, 2005. "Competing Against Experienced and Inexperienced Players," Experimental Economics, Springer, vol. 8(1), pages 55-75, April. [Downloadable!] (restricted)
  2. Ernan Haruvy & Charles N. Noussair, 2006. "The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets," Journal of Finance, American Finance Association, vol. 61(3), pages 1119-1157, 06. [Downloadable!] (restricted)
  3. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322. [Downloadable!] (restricted)
    Other versions:
  4. Porter, David P & Smith, Vernon L, 1995. "Futures Contracting and Dividend Uncertainty in Experimental Asset Markets," Journal of Business, University of Chicago Press, vol. 68(4), pages 509-41, October. [Downloadable!] (restricted)
  5. Van Boening, Mark V. & Williams, Arlington W. & LaMaster, Shawn, 1993. "Price bubbles and crashes in experimental call markets," Economics Letters, Elsevier, vol. 41(2), pages 179-185. [Downloadable!] (restricted)
  6. Peterson, Steven P., 1993. "Forecasting dynamics and convergence to market fundamentals : Evidence from experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 269-284, December. [Downloadable!] (restricted)
  7. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-59, July.
    Other versions:
  8. Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-51, September. [Downloadable!] (restricted)
  9. Charles Noussair & Steven Tucker, 2006. "FUTURES MARKETS AND BUBBLE FORMATION IN EXPERIMENTAL ASSET MARKETS *," Pacific Economic Review, Blackwell Publishing, vol. 11(2), pages 167-184, 06. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gadi Barlevy, 2007. "Economic theory and asset bubbles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 44-59. [Downloadable!]
  2. Jonathan E. Alevy & Michael S. Haigh & John List, 2006. "Information Cascades: Evidence from An Experiment with Financial Market Professionals," NBER Working Papers 12767, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Ernst Fehr & Jean-Robert Tyran, 2005. "Individual Irrationality and Aggregate Outcomes," Discussion Papers 05-09, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  4. Noussair, C.N. & Powell, O.R., 2008. "Peaks and Valleys: Experimental Asset Markets With Non-Monotonic Fundamentals," Discussion Paper 2008-49, Tilburg University, Center for Economic Research. [Downloadable!]
  5. Maroš Servátka & George Theocharides, 2007. "Understanding Credit Risk: A Classroom Experiment," Working Papers in Economics 07/06, University of Canterbury, Department of Economics. [Downloadable!]
  6. Jörg Oechssler & Carsten Schmidt & Wendelin Schnedler, 2007. "Asset Bubbles without Dividends - An Experiment," Working Papers 0439, University of Heidelberg, Department of Economics, revised Apr 2007. [Downloadable!]
    Other versions:
  7. Corgnet Bruce & Angela Sutan & Arvin Aashta, 2006. "The power of words in financial markets: soft versus hard communication,a strategy method experiment," Labsi Experimental Economics Laboratory University of Siena 006, University of Siena. [Downloadable!]
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