Double Bubbles in Assets Markets with Multiple Generations
AbstractWe construct an asset market in a finite horizon overlapping-generations environment. Subjects are tested for comprehension of their fundamental value exchange environment, and then reminded during each of 25 periods of its declining new value. We observe price bubbles forming when new generations enter the market with additional liquidity and bursting as old generations exit the market and withdrawing cash. The entry and exit of traders in the market creates an M shaped double bubble price path over the life of the traded asset. This finding is significant in documenting that bubbles can reoccur within one extended trading horizon and, consistent with previous cross-subject comparisons, shows how fluctuations in market liquidity influence price paths. We also find that trading experience leads to price expectations that incorporate fundamental value.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 11-10.
Length: 18 pages
Date of creation: 2011
Date of revision:
Asset Markets; Price Bubbles; Laboratory Experiments; Overlapping Generations;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-DGE-2011-10-09 (Dynamic General Equilibrium)
- NEP-EXP-2011-10-09 (Experimental Economics)
- NEP-MST-2011-10-09 (Market Microstructure)
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.:
- Charles N. Noussair & Owen Powell, 2010. "Peaks and valleys: Price discovery in experimental asset markets with non-monotonic fundamentals," Journal of Economic Studies, Emerald Group Publishing, vol. 37(2), pages 152-180, May.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001.
"Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality,"
Econometric Society, vol. 69(4), pages 831-59, July.
- Noussair, C.N. & Lei , V. & Plott, C., 2001. "Non-speculative bubbles in experimental asset markets: Lack of common knowledge of rationality vs. actual irrationality," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381105, Tilburg University.
- Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
- Sunder, S., 1992. "Experimental Asset Markets: A Survey," GSIA Working Papers 1992-19, Carnegie Mellon University, Tepper School of Business.
- Mark van Boening & Vernon L. Smith & Charissa P. Wellford, 2000. "Dividend timing and behavior in laboratory asset markets," Economic Theory, Springer, vol. 16(3), pages 567-583.
- Charles Noussair & Steven Tucker, 2006. "Futures Markets And Bubble Formation In Experimental Asset Markets ," Pacific Economic Review, Wiley Blackwell, vol. 11(2), pages 167-184, 06.
- Noussair, C. & Robin, S. & Ruffieux, B., 1998. "Bubbles and Anti-Crashes in Laboratory Asset Markets with Constant Fundamental Values," Purdue University Economics Working Papers 1119, Purdue University, Department of Economics.
- Vivian Lei & Filip Vesely, 2009. "Market Efficiency: Evidence From A No-Bubble Asset Market Experiment," Pacific Economic Review, Wiley Blackwell, vol. 14(2), pages 246-258, 05.
- Charles Noussair & Stephane Robin & Bernard Ruffieux, 2001. "Price Bubbles in Laboratory Asset Markets with Constant Fundamental Values," Experimental Economics, Springer, vol. 4(1), pages 87-105, June.
- Reshmaan N. Hussam & David Porter & Vernon L. Smith, 2008. "Thar She Blows: Can Bubbles Be Rekindled with Experienced Subjects?," American Economic Review, American Economic Association, vol. 98(3), pages 924-37, June.
- McCabe, Kevin A., 1989. "Fiat money as a store of value in an experimental market," Journal of Economic Behavior & Organization, Elsevier, vol. 12(2), pages 215-231, October.
- David Porter & Vernon Smith, 1994. "Stock market bubbles in the laboratory," Applied Mathematical Finance, Taylor & Francis Journals, vol. 1(2), pages 111-128.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013.
"It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market,"
AMSE Working Papers
1340, Aix-Marseille School of Economics, Marseille, France, revised 08 Aug 2013.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013. "It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market," Working Papers halshs-00854513, HAL.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuchiro Ishikawa, 2012. "Effect of uncertainty about others’ rationality in experimental asset markets," AMSE Working Papers 1234, Aix-Marseille School of Economics, Marseille, France.
- Huan Xie & Jipeng Zhang, 2012.
"Bubbles and Experience: An Experiment with a Steady Inflow of New Traders,"
CIRANO Working Papers
- Huan Xie & Jipeng Zhang, 2012. "Bubbles and Experience: An Experiment with a Steady Inflow of New Traders," Working Papers 12001, Concordia University, Department of Economics.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013. "How Do Experienced Traders Respond to Inflows of Inexperienced Traders? An Experimental Analysis," Working Papers halshs-00920413, HAL.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2012. "Effect of Uncertainty about Others' Rationality in Experimental Asset Markets: An Experimental Analysis," Working Papers halshs-00793613, HAL.
- Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013. "How Do Experienced Traders Respond to Inflows of Inexperienced Traders? An Experimental Analysis," AMSE Working Papers 1359, Aix-Marseille School of Economics, Marseille, France, revised 18 Dec 2013.
- Jonathan E. Alevy & Michael K. Price, 2012. "Advice and Fictive Learning: The Pricing of Assets in the Laboratory," Working Papers 2012-07, University of Alaska Anchorage, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Megan Luetje).
If references are entirely missing, you can add them using this form.