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Asset Bubbles without Dividends - An Experiment


  • Oechssler, Jörg
  • Schmidt, Carsten
  • Schnedler, Wendelin


Bubbles in asset markets have been documented in numerous experimental studies. However, all experiments in which bubbles occur pay dividends after each trading day. In this paper we study whether bubbles can occur in markets without dividends. We investigate the role of two features that are present in real markets. (1) The mere possibility that some traders may have inside information, and (2) the option to communicate with other traders. We find that bubbles can indeed occur without dividends. Surprisingly, communication turns out to be counterproductive for bubble formation, whereas the possibility of inside information is, as expected, crucial.

Suggested Citation

  • Oechssler, Jörg & Schmidt, Carsten & Schnedler, Wendelin, 2009. "Asset Bubbles without Dividends - An Experiment," Working Papers 0439, University of Heidelberg, Department of Economics.
  • Handle: RePEc:awi:wpaper:0439 Note: This paper is part of

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    References listed on IDEAS

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    Cited by:

    1. Michailova, Julija, 2010. "Development of the overconfidence measurement instrument for the economic experiment," MPRA Paper 26384, University Library of Munich, Germany.
    2. Marina Fiedler, 2011. "Symposium: Experience and Confidence in an Internet-Based Asset Market Experiment," Southern Economic Journal, Southern Economic Association, vol. 78(1), pages 30-52, July.
    3. Palan, Stefan, 2010. "Digital options and efficiency in experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 506-522, September.
    4. Michailova, Julija, 2010. "Development of the overconfidence measurement instrument for the economic experiment," MPRA Paper 26384, University Library of Munich, Germany.
    5. Charles N. Noussair & Gregers Richter & Jean-Robert Tyran, 2008. "Money Illusion and Nominal Inertia in Experimental Asset Markets," Discussion Papers 08-29, University of Copenhagen. Department of Economics.
    6. Maroš Servátka & George Theocharides, 2011. "Understanding Credit Risk: A Classroom Experiment," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(1), pages 79-86, January.

    More about this item


    asset markets; bubbles; experiment; mirages; dividends;

    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
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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