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Peaks and Valleys : Experimental Asset Markets With Non-Monotonic Fundamentals

Listed author(s):
  • Noussair, C.N.

    (Tilburg University, Center For Economic Research)

  • Powell, O.R.

    (Tilburg University, Center For Economic Research)

We report the results of an experiment designed to measure how well asset market prices track fundamentals when the latter experience peaks and troughs. We observe greater price efficiency in markets in which fundamentals rise to a peak and then decline, than in markets in which fundamentals decline to a trough and undergo a subsequent increase. The findings demonstrate that the characteristics of the time path of the fundamental value can influence the degree of market efficiency.

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File URL: https://pure.uvt.nl/portal/files/990165/2008-49.pdf
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2008-49.

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Date of creation: 2008
Handle: RePEc:tiu:tiucen:9be9b88a-9251-4921-a913-61b1b5657e1d
Contact details of provider: Web page: http://center.uvt.nl

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  11. repec:pri:cepsud:91malkiel is not listed on IDEAS
  12. Froot, Kenneth A & Obstfeld, Maurice, 1991. "Intrinsic Bubbles: The Case of Stock Prices," American Economic Review, American Economic Association, vol. 81(5), pages 1189-1214, December.
  13. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111-111.
  14. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
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  17. Ernan Haruvy & Charles N. Noussair, 2006. "The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets," Journal of Finance, American Finance Association, vol. 61(3), pages 1119-1157, 06.
  18. Van Boening, Mark V. & Williams, Arlington W. & LaMaster, Shawn, 1993. "Price bubbles and crashes in experimental call markets," Economics Letters, Elsevier, vol. 41(2), pages 179-185.
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  20. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
  21. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
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