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Communications in Financial Markets: a Strategy method Experiment

  • Brice Corgnet

    ()

    (Universidad de Navarra)

  • Angela Sutan

    ()

    (ESC Dijon, France)

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.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random45ab5988c3bf2/1188406798_WP1_Brice.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 06/07.

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Length: 58 pages
Date of creation:
Date of revision:
Handle: RePEc:una:unccee:wp0607
Contact details of provider: Web page: http://www.unav.es/facultad/econom

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  1. 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.
  2. 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.
  3. Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
  4. 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 1119-51, September.
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