Soft Landing of a Stock Market Bubble, An Experimental Study
The paper investigates the effect of interest policy on price bubbles, trading behavior and portfolio choice in experimental stock markets. A series of experiments has 8 participants trade an asset over 15 periods. Alternatively, the participants can invest money in interest-bearing bonds. Treatment groups are subjected to an endogenous interest policy, while control groups experience a constant interest rate. Our stock markets are characterized by bubbles. While we observe a small positive impact of our interest policy on bubbles, the policy also strongly increases market volatility. On the other hand, concerning portfolio choice, we find evidence for value-driven (rational) investment behavior.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Schönberggasse 1, CH-8001 Zürich|
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark van Boening & Vernon L. Smith & Charissa P. Wellford, 2000. "Dividend timing and behavior in laboratory asset markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 567-583.
- Brock, W.A. & Hommes, C.H., 1996.
"Hetergeneous Beliefs and Routes to Chaos in a Simple Asset Pricing Model,"
9621, Wisconsin Madison - Social Systems.
- Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
- 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.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-59, July.
- Tirole, Jean, 1982. "On the Possibility of Speculation under Rational Expectations," Econometrica, Econometric Society, vol. 50(5), pages 1163-81, September.
- Porter, David P & Smith, Vernon L, 1995. "Futures Contracting and Dividend Uncertainty in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 68(4), pages 509-41, October.
- Andrews, Donald W K, 1991.
"Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation,"
Econometric Society, vol. 59(3), pages 817-58, May.
- Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Robert J. Shiller, 1980.
"Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?,"
NBER Working Papers
0456, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:090. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser)
If references are entirely missing, you can add them using this form.