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Dividend timing and behavior in laboratory asset markets

Author

Listed:
  • Mark van Boening

    () (School of Business Administration, 220 Holman Hall, University of Mississippi, University,MS 38677, USA)

  • Vernon L. Smith

    (Economic Science Laboratory, McClelland Hall, University of Arizona, Tucson, AZ 85721, USA)

  • Charissa P. Wellford

    (Federal Trade Commission, Bureau of Economics S-5013, 600 Pennsylvania Avenue NW,Washington, DC 20580, USA)

Abstract

This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten "A1" markets, a single dividend is paid at the end of the trading horizon. In nine "A2" markets, dividends are paid at the end of each trading period. In seven "A3" markets, some of the dividends are paid at the end of the trading horizon, and the rest are paid on a per-period basis. The results indicate that price bubbles are most likely in A2 markets, less likely in A3 markets, and least likely in A1 markets. Six distinct hypotheses are considered. The data suggest that the concentration of dividend value at a single point in time helps to create common expectations, and thus significantly reduce the incidence of bubbles. Also, the results underscore the difficulty facing econometric tests on field data where fundamental value has to be approximated.

Suggested Citation

  • 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.
  • Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:567-583
    Note: Received: May 5, 1999; revised version: April 13, 2000
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    More about this item

    Keywords

    Price bubbles; Asset market experiments; Expectations.;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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