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Symposium: Unregulated Stock Markets in Second Life


  • Robert J. Bloomfield

    () (Samuel Curtis Johnson Graduate School of Management, 450 Sage Hall, Cornell University, Ithaca, NY 14853, USA)

  • Young Jun Cho

    (†School of Accountancy, Singapore Management University, 60 Stamford Road, Singapore 178900)


SLCapex is a stock exchange owned and operated by “residents” of the online virtual world Second Life. Despite its almost complete lack of regulation and legal protections against fraud or insider trading, issuers were able to raise approximately US$145,000 from investors, which grew to US$900,000 in market value before plummeting, resulting in overall investor returns of -71%. Investors in large issuances lost more than investors in small issuances, and small investors experienced more severe losses relative to large investors when more money was at stake, indicating that the market did a poor job of protecting investors from issuers and of providing a level playing field for investors. Theories from financial economics can explain the markets' poor performance in the absence of regulatory and legal institutions, but they cannot easily explain why issuers were able to raise capital in such a setting.

Suggested Citation

  • Robert J. Bloomfield & Young Jun Cho, 2011. "Symposium: Unregulated Stock Markets in Second Life," Southern Economic Journal, Southern Economic Association, vol. 78(1), pages 6-29, July.
  • Handle: RePEc:sej:ancoec:v:78:1:y:2011:p:6-29

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    Cited by:

    1. Innocenti, Alessandro, 2017. "Virtual reality experiments in economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 71-77.

    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation


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