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The dynamics of trader motivations in asset bubbles


  • Caginalp, G.
  • Ilieva, V.


Asset market experiments are analyzed by distinguishing participants who are net bidders versus net offerers when the trading price is above fundamental value. We find evidence that the cash supply of the bidders diminishes and the cash supply of the offerers increases as the bubble forms. This suggests that the bubble is fueled by the cash of the momentum players and the reversal is caused by inadequate cash in their possession. The experimental data is also analyzed using asset flow difference equations with the result that both bidders are strongly influenced and offerers (surprisingly) are moderately influenced by price trend.

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  • Caginalp, G. & Ilieva, V., 2008. "The dynamics of trader motivations in asset bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 641-656, June.
  • Handle: RePEc:eee:jeborg:v:66:y:2008:i:3-4:p:641-656

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    References listed on IDEAS

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    Cited by:

    1. Lugovskyy, Volodymyr & Puzzello, Daniela & Tucker, Steven & Williams, Arlington, 2014. "Asset-holdings caps and bubbles in experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 781-797.
    2. Ernan Haruvy & Charles N. Noussair & Owen Powell, 2014. "The Impact of Asset Repurchases and Issues in an Experimental Market," Review of Finance, European Finance Association, vol. 18(2), pages 681-713.
    3. repec:eee:jeborg:v:137:y:2017:i:c:p:232-258 is not listed on IDEAS
    4. Brzezicka Justyna & Wisniewski Radosław, 2014. "Price Bubble In The Real Estate Market - Behavioral Aspects," Real Estate Management and Valuation, De Gruyter Open, vol. 22(1), pages 1-14, March.
    5. Peiran Jiao & Amos Nadler, 2016. "The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading," Economics Series Working Papers 806, University of Oxford, Department of Economics.
    6. Volodymyr Lugovskyy & Daniela Puzzello, & Steven Tucker & Arlington Williams, 2012. "Can Concentration Control Policies Eliminate Bubbles?," Working Papers in Economics 12/13, University of Waikato.
    7. Chen, Zhiping & Duan, Qihong, 2011. "New models of trader beliefs and their application for explaining financial bubbles," Economic Modelling, Elsevier, vol. 28(5), pages 2215-2227, September.
    8. Charles N. Noussair & Steven Tucker, 2016. "Cash Inflows And Bubbles In Asset Markets With Constant Fundamental Values," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1596-1606, July.

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