IDEAS home Printed from https://ideas.repec.org/a/kap/expeco/v4y2001i1p87-105.html
   My bibliography  Save this article

Price Bubbles in Laboratory Asset Markets with Constant Fundamental Values

Author

Listed:
  • Charles Noussair

    ()

  • Stephane Robin

    ()

  • Bernard Ruffieux

    ()

Abstract

We construct asset markets that are similar to those studied by Smith, Suchanek and Williams (Econometrica. 56, 1119–1151) in which bubbles and crashes tended to occur. The main difference between the markets studied here and those studied by Smith et al. is that in the markets studied here, the fundamental value of the asset is constant over the entire life of the asset. In four of the eight sessions reported here, we observe bubbles, which are prices considerably higher than fundamental values. The data suggest that the frequent payment of dividends is a major cause of bubble formation. The property that the fundamental value remains constant over the course of the trading horizon is not sufficient to eliminate the possibility of a bubble. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Charles Noussair & Stephane Robin & Bernard Ruffieux, 2001. "Price Bubbles in Laboratory Asset Markets with Constant Fundamental Values," Experimental Economics, Springer;Economic Science Association, vol. 4(1), pages 87-105, June.
  • Handle: RePEc:kap:expeco:v:4:y:2001:i:1:p:87-105
    DOI: 10.1023/A:1011445522861
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1011445522861
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sheryl B. Ball & Charles A. Holt, 1998. "Classroom Games: Speculation and Bubbles in an Asset Market," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 207-218, Winter.
    2. Mark van Boening & Vernon L. Smith & Charissa P. Wellford, 2000. "Dividend timing and behavior in laboratory asset markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 567-583.
    3. Duxbury, Darren, 1995. " Experimental Asset Markets within Finance," Journal of Economic Surveys, Wiley Blackwell, vol. 9(4), pages 331-371, December.
    4. Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-1151, September.
    5. Sunder, S., 1992. "Experimental Asset Markets: A Survey," GSIA Working Papers 1992-19, Carnegie Mellon University, Tepper School of Business.
    6. Plott, Charles R. & Gray, Peter, 1990. "The multiple unit double auction," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 245-258, March.
    7. Camerer, Colin & Weigelt, Keith, 1991. "Information Mirages in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 64(4), pages 463-493, October.
    8. Porter, David P & Smith, Vernon L, 1995. "Futures Contracting and Dividend Uncertainty in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 68(4), pages 509-541, October.
    9. Van Boening, Mark V. & Williams, Arlington W. & LaMaster, Shawn, 1993. "Price bubbles and crashes in experimental call markets," Economics Letters, Elsevier, vol. 41(2), pages 179-185.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    asset market; bubble; experiment; speculation;

    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:kap:expeco:v:4:y:2001:i:1:p:87-105. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.