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

Author

Listed:
  • Noussair, C.N.

    (Tilburg University, Center For Economic Research)

  • Powell, O.R.

    (Tilburg University, Center For Economic Research)

Abstract

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.

Suggested Citation

  • Noussair, C.N. & Powell, O.R., 2008. "Peaks and Valleys : Experimental Asset Markets With Non-Monotonic Fundamentals," Discussion Paper 2008-49, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:9be9b88a-9251-4921-a913-61b1b5657e1d
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Oechssler, Jörg & Schmidt, Carsten & Schnedler, Wendelin, 2011. "On the ingredients for bubble formation: Informed traders and communication," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1831-1851.
    2. Palan, Stefan, 2010. "Digital options and efficiency in experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 506-522, September.
    3. Daniel Zizzo, 2010. "Experimenter demand effects in economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 75-98, March.

    More about this item

    Keywords

    Bubble; Peak; Experiment;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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