Communications in Financial Markets: a Strategy method Experiment
AbstractThe main objective of this paper is to analyze the impact of uninformative communications on asset prices. An experimental approach allows us to control for the release of a priori uninformative messages. We introduce the release of messages in standard experimental asset markets with bubbles using a strategy method experiment. We conjecture that messages that are a priori uninformative can significantly impact the level of asset prices. Such communications may be used by boundedly rational subjects to compute the fundamental value of the asset. In addition, rational agents may anticipate such an effect and adapt their strategy to the messages received. We asked 182 subjects to construct strategies about their action in a standard experimental asset market environment. Our analysis sheds light on the possibility of manipulation and stabilization of financial markets by influential agents such as financial gurus or central bankers.
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Bibliographic InfoPaper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 06/07.
Length: 58 pages
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Web page: http://www.unav.es/facultad/econom
asset markets; bubbles; market communications; traders’ bounded rationality; strategy method experime;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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Open Access publications from Tilburg University
urn:nbn:nl:ui:12-381105, Tilburg University.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-59, July.
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