Bubbles and information: An experiment
AbstractWe study whether information about imminent future dividends can abate bubbles in experimental asset markets. Using the seminal design of Smith et al. (1988) we find that markets where traders are asymmetrically informed about future dividends have smaller, and shorter, bubbles than markets with symmetrically informed or uninformed traders. Hence, fundamental values are better reflected in market prices ? implying higher market efficiency ? when some traders know more than others about the future prospects of an asset. We also find that asymmetric information has a similar abating impact on bubbles as when uninformed traders accumulate experience, though for different reasons.
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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2008-20.
Date of creation: Sep 2008
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Bubbles; information; experiment;
Other versions of this item:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-29 (All new papers)
- NEP-CBE-2008-09-29 (Cognitive & Behavioural Economics)
- NEP-CTA-2008-09-29 (Contract Theory & Applications)
- NEP-EXP-2008-09-29 (Experimental Economics)
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