IDEAS home Printed from https://ideas.repec.org/p/inn/wpaper/2009-26.html
   My bibliography  Save this paper

Bubble or no Bubble - The Impact of Market Model on the Formation of Price Bubbles in Experimental Asset Markets

Author

Listed:
  • Michael Kirchler
  • Jürgen Huber
  • Thomas Stöckl

Abstract

For the past two decades a market model introduced by Smith, Suchanek, and Williams (1988, henceforth SSW) has dominated experimental research on financial markets. In SSW the fundamental value of the traded asset is determined by the expected value of a finite stream of dividend payments. This setup implies a deterministically falling fundamental value with a predetermined end of the life-span of the asset and extremely high dividend-payouts. We present a new market model in which we implement the fundamental value by adopting a random walk process. Compared to SSW-markets, prices in the new markets (SAVE) are more efficient and end-of-experiment imbalances common in SSW-markets are not observed. Our results demonstrate, that implicit features of the SSW market model contribute to bubble formation.

Suggested Citation

  • Michael Kirchler & Jürgen Huber & Thomas Stöckl, 2009. "Bubble or no Bubble - The Impact of Market Model on the Formation of Price Bubbles in Experimental Asset Markets," Working Papers 2009-26, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2009-26
    as

    Download full text from publisher

    File URL: https://www2.uibk.ac.at/downloads/c4041030/wpaper/2009-26.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheung, Stephen L. & Coleman, Andrew, 2011. "League-Table Incentives and Price Bubbles in Experimental Asset Markets," IZA Discussion Papers 5704, Institute of Labor Economics (IZA).
    2. Dragana Draganac, 2017. "Do Dividend Shocks Affect Excess Returns: An Experimental Study," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(214), pages 45-86, June - Se.
    3. Thomas Stöckl & Jürgen Huber & Michael Kirchler, 2010. "Bubble measures in experimental asset markets," Experimental Economics, Springer;Economic Science Association, vol. 13(3), pages 284-298, September.

    More about this item

    Keywords

    Experimental economics; asset market; bubble; market efficiency;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inn:wpaper:2009-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Janette Walde (email available below). General contact details of provider: https://edirc.repec.org/data/fuibkat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.