Communications in Financial Markets: a Strategy method Experiment
The main objective of this paper is to analyze the impact of uninformative communications on asset prices. An experimental approach allows us to control for the release of a priori uninformative messages. We introduce the release of messages in standard experimental asset markets with bubbles using a strategy method experiment. We conjecture that messages that are a priori uninformative can significantly impact the level of asset prices. Such communications may be used by boundedly rational subjects to compute the fundamental value of the asset. In addition, rational agents may anticipate such an effect and adapt their strategy to the messages received. We asked 182 subjects to construct strategies about their action in a standard experimental asset market environment. Our analysis sheds light on the possibility of manipulation and stabilization of financial markets by influential agents such as financial gurus or central bankers.
|Date of creation:||01 Aug 2007|
|Contact details of provider:|| Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales|
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- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001.
"Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality,"
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- Martin Dufwenberg & Tobias Lindqvist & Evan Moore, 2005. "Bubbles and Experience: An Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1731-1737, December.
- Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 453-481, August.
- Sonnemans, J. & Hommes, C.H. & Tuinstra, J. & van de Velden, H., 1999. "The Instability of a Heterogeneous Cobweb economy: a Strategy Experiment on Expectation Formation," CeNDEF Working Papers 99-06, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-1151, September. Full references (including those not matched with items on IDEAS)
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