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Thar she resurges: The case of assets that lack positive fundamental value

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  • Zhengyang Bao
  • Andreas Leibbrandt
  • ple391

Abstract

This experimental study investigates the trading of assets that mimic the features of most cryptocurrencies. Groups of traders are randomized into asset markets where fundamental values are either positive, zero, or negative. Our findings indicate the presence of much larger bubbles in asset markets with non-positive fundamental values than in asset markets with positive fundamental values, with either risky or risk-free dividends. We show that these findings are consistent with trader expectations but not with loss aversion and complexity. This study provides experimental evidence that supports the need for particular scrutiny of asset markets that lack positive fundamental value.

Suggested Citation

  • Zhengyang Bao & Andreas Leibbrandt & ple391, 2019. "Thar she resurges: The case of assets that lack positive fundamental value," Monash Economics Working Papers 12-19, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2019-12
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    More about this item

    Keywords

    Asset market experiment; cryptocurrency; fundamental values;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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