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Speculative attacks: A laboratory study in continuous time

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Author Info
Cheung, Yin-Wong
Friedman, Daniel

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Abstract

We examine speculative attacks in a controlled laboratory environment featuring continuous time, size asymmetries, and varying amounts of public information. Attacks succeeded in 233 of 344 possible cases. When speculators have symmetric size and access to information: (a) weaker fundamentals increase the likelihood of successful speculative attacks and hasten their onset, and (b) contrary to some theory, success is enhanced by public access to information about either the net speculative position or the fundamentals. The presence of a larger speculator further enhances success, and experience with large speculators increases small speculators' response to the public information. However, giving the large speculator increased size or better information does not significantly strengthen his impact.

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Publisher Info
Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 28 (2009)
Issue (Month): 6 (October)
Pages: 1064-1082
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Handle: RePEc:eee:jimfin:v:28:y:2009:i:6:p:1064-1082

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Web page: http://www.elsevier.com/locate/inca/30443

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Related research
Keywords: Currency crisis Speculative attack Laboratory experiment Coordination game Preemption Large player;

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References listed on IDEAS
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Cited by:
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  1. Robin Pope & Reinhard Selten & Sebastian Kube & Jürgen von Hagen, 2006. "Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them," Labsi Experimental Economics Laboratory University of Siena 010, University of Siena. [Downloadable!]
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