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Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality Author info | Abstract | Publisher info | Download info | Related research | Statistics Lei, V.
Noussair, C.
Plott, C.R.
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We report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets. In a setting in which speculation is not possible, bubbles and crashes are observed. The results suggest that the departures from fundamental values are not caused by the lack of common knowledge of rationality leading to speculation, but rather by behavior that itself exhibits elements of rationality.
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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number
1120.
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Length: 32 pages
Date of creation: Nov 1998Date of revision:
Handle: RePEc:pur:prukra:1120Contact details of provider: Postal: Krannert Building, West Lafayette, IN 47907 Web page: http://www.krannert.purdue.edu/programs/phd More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Paul S. Chun).
Keywords: EXPERIMENTS FINANCIAL MARKET BUSINESS CYCLES Other versions of this item:
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data) G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
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