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Flat Bubbles in Long-Horizon Experiments: Results from two Market Conditions

Author

Listed:
  • Tomoe Hoshihata
  • Ryuichiro Ishikawa

    (University of Tsukuba)

  • Nobuyuki Hanaki

    (Université Nice Sophia Antipolis
    GREDEG-CNRS
    IUF)

  • Eizo Akiyama

    (University of Tsukuba, Japan)

Abstract

We report the results of asset market experiments with a long horizon of 100 periods conducted under two market conditions: call markets and continuous double auctions. In both market formats, we observe flat bubbles, i.e., situations where market prices remain steady while fundamental values decrease as the experiments proceed, as well as multiple bubbles. We confirm the stylized facts found in short-horizon experimental asset markets such as bubble-crash price dynamics, and the similarity of the price dynamics between call markets and continuous double auctions. We also examine the relationship between individual trading performance and cognitive ability.

Suggested Citation

  • Tomoe Hoshihata & Ryuichiro Ishikawa & Nobuyuki Hanaki & Eizo Akiyama, 2017. "Flat Bubbles in Long-Horizon Experiments: Results from two Market Conditions," GREDEG Working Papers 2017-32, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2017-32
    as

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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2017-32.pdf
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    References listed on IDEAS

    as
    1. Ciril Bosch-Rosa & Thomas Meissner & Antoni Bosch-Domènech, 2018. "Cognitive bubbles," Experimental Economics, Springer;Economic Science Association, vol. 21(1), pages 132-153, March.
    2. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-859, July.
    3. Akiyama, Eizo & Hanaki, Nobuyuki & Ishikawa, Ryuichiro, 2014. "How do experienced traders respond to inflows of inexperienced traders? An experimental analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 1-18.
    4. Nobuyuki Hanaki & Eizo Akiyama & Yukihiko Funaki & Ryuichiro Ishikawa, 2017. "Diversity in Cognitive Ability Enlarges Mispricing in Experimental Asset Markets," Working Papers halshs-01202088, HAL.
    5. repec:eee:beexfi:v:8:y:2015:i:c:p:1-17 is not listed on IDEAS
    6. Cheung, Stephen L. & Hedegaard, Morten & Palan, Stefan, 2014. "To see is to believe: Common expectations in experimental asset markets," European Economic Review, Elsevier, vol. 66(C), pages 84-96.
    7. repec:eee:beexfi:v:12:y:2016:i:c:p:14-22 is not listed on IDEAS
    8. Karel R. S. M. Mertens & Morten O. Ravn, 2014. "Fiscal Policy in an Expectations-Driven Liquidity Trap," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1637-1667.
    9. Fischbacher, Urs & Hens, Thorsten & Zeisberger, Stefan, 2013. "The impact of monetary policy on stock market bubbles and trading behavior: Evidence from the lab," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2104-2122.
    10. Ernan Haruvy & Yaron Lahav & Charles N. Noussair, 2007. "Traders' Expectations in Asset Markets: Experimental Evidence," American Economic Review, American Economic Association, vol. 97(5), pages 1901-1920, December.
    11. Stefan Palan, 2013. "A Review Of Bubbles And Crashes In Experimental Asset Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 570-588, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Experimental asset markets; call markets; continuous double auctions; long horizon; multiple bubbles; cognitive reflection test;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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