scholarly journals Retrading, production, and asset market performance

2015 ◽  
Vol 112 (47) ◽  
pp. 14557-14562 ◽  
Author(s):  
Steven D. Gjerstad ◽  
David Porter ◽  
Vernon L. Smith ◽  
Abel Winn
Keyword(s):  
Effective Treatment ◽  
Laboratory Experiments ◽  
Flow Model ◽  
Asset Markets ◽  
Asset Market ◽  
Price Bubbles ◽  
Equilibrium Prices ◽  
Consumption Values ◽  
Market Experiments ◽  
Stock Flow

Prior studies have shown that traders quickly converge to the price–quantity equilibrium in markets for goods that are immediately consumed, but they produce speculative price bubbles in resalable asset markets. We present a stock-flow model of durable assets in which the existing stock of assets is subject to depreciation and producers may produce additional units of the asset. In our laboratory experiments inexperienced consumers who can resell their units disregard the consumption value of the assets and compete vigorously with producers, depressing prices and production. Consumers who have first participated in experiments without resale learn to heed their consumption values and, when they are given the option to resell, trade at equilibrium prices. Reproducibility is therefore the most natural and most effective treatment for suppression of bubbles in asset market experiments.

scholarly journals Designing Call Auction Institutions to Eliminate Price Bubbles: Is English Dutch the Best?

2020 ◽  
Vol 2 (2) ◽  
pp. 225-236
Author(s):  
Cary Deck ◽  
Maroš Servátka ◽  
Steven Tucker
Keyword(s):  
Laboratory Experiments ◽  
Asset Markets ◽  
Double Auction ◽  
Commodity Market ◽  
Price Bubbles ◽  
Dutch Auction ◽  
Call Auction ◽  
Burst Pattern ◽  
Fundamental Value ◽  
Market Experiments

The bubble-and-burst pattern in asset markets is among the most replicable results in experimental economics. Using controlled laboratory experiments, we compare mispricing in markets organized by standard double auction rules with mispricing in markets organized by two alternative sets of clock auctions. The double Dutch auction, shown to be more efficient than the double auction in past commodity market experiments, does not eliminate bubbles. However, the English Dutch auction yields prices reflective of underlying fundamentals and succeeds in taming bubbles even with inexperienced traders in a declining fundamental value environment with an increasing cash-to-asset ratio. (JEL C91, D44, G12)

Fundamentals, momentum, and bubbles in experimental asset markets

2016 ◽  
Vol 8 (1) ◽  
pp. 17-38
Author(s):  
Sean M Collins ◽  
Alisa G. Brink
Keyword(s):  
Design Methodology ◽  
Asset Markets ◽  
Asset Market ◽  
Seminal Paper ◽  
Content Type ◽  
Price Bubbles ◽  
Experimental Asset Markets ◽  
Experimental Laboratory ◽  
Initial Path ◽  
Fundamental Value

Purpose – The purpose of this paper is to report the results of a study concerning how fundamental-motivated investors, and their subsequent impact on the path of prices, affect the severity of price bubbles in an experimental laboratory asset market. Design/methodology/approach – In a laboratory experiment, asset markets are manipulated by systematically replacing inexperienced human traders with automated traders programmed to submit bids and asks at fundamental value. Findings – When traders in a market are automated to invest on fundamentals, deviations from fundamental value are initially suppressed, but reappear when automated traders cease to influence prices. A significant reduction in the severity of the resulting bubble may be attributed to the interaction of automated traders and humans through the initial path of prices when controlling for changes in liquidity. This reduction corresponds to reduced autocorrelation in the time series of returns. Originality/value – This paper represents the first attempt (to the authors’ knowledge) to extend the intervention approach of the seminal paper by Smith et al. (1988) to systematically study the extent to which manipulation of initial path of prices impacts the formation and magnitude of bubbles in the laboratory.

scholarly journals Thar SHE Blows? Gender, Competition, and Bubbles in Experimental Asset Markets

2015 ◽  
Vol 105 (2) ◽  
pp. 906-920 ◽  
Author(s):  
Catherine C. Eckel ◽  
Sascha C. Füllbrunn
Keyword(s):  
Financial Markets ◽  
Inverse Relationship ◽  
Meta Analysis ◽  
Experimental Methodology ◽  
Asset Markets ◽  
Asset Market ◽  
Price Bubbles ◽  
Mixed Markets ◽  
Experimental Asset Markets ◽  
Market Experiment

Do women and men behave differently in financial asset markets? Our results from an asset market experiment show a marked gender difference in producing speculative price bubbles. Mixed markets show intermediate values, and a meta-analysis of 35 markets from different studies confirms the inverse relationship between the magnitude of price bubbles and the frequency of female traders in the market. Women's price forecasts also are significantly lower, even in the first period. Implications for financial markets and experimental methodology are discussed. (JEL D14, D81, G01, G11, J16)

scholarly journals Thar She Blows: Can Bubbles Be Rekindled with Experienced Subjects?

2008 ◽  
Vol 98 (3) ◽  
pp. 924-937 ◽  
Author(s):  
Reshmaan N Hussam ◽  
David Porter ◽  
Vernon L Smith
Keyword(s):  
Asset Markets ◽  
Asset Market ◽  
Environment Changes ◽  
Price Bubbles ◽  
The Third ◽  
Experience Levels ◽  
Price Bubble ◽  
Error Elimination ◽  
Challenging Environment

We report 28 new experiment sessions consisting of up to three experience levels to examine the robustness of learning and “error” elimination among participants in a laboratory asset market and its effect on price bubbles. Our answer to the title question is: “yes.” We impose a large increase in liquidity and dividend uncertainty to shock the environment of experienced subjects who have converged to equilibrium, and this treatment rekindles a bubble. However, in replications of that same challenging environment across three experience levels, we discover that the environment yields a rare residual tendency to bubble even in the third experience session. Therefore, a caveat must be placed on the effect of twice-experienced subjects in asset markets: in order for price bubbles to be extinguished, the environment in which the participants engage in exchange must be stationary and bounded by a range of parameters. Experience, including possible “error” elimination, is not robust to major new environment changes in determining the characteristics of a price bubble. (JEL C91, D83)

scholarly journals The Role of Trading Frictions in Real Asset Markets

2011 ◽  
Vol 101 (4) ◽  
pp. 1106-1143 ◽  
Author(s):  
Alessandro Gavazza
Keyword(s):  
Empirical Analysis ◽  
Capacity Utilization ◽  
Asset Markets ◽  
Asset Market ◽  
Commercial Aircraft ◽  
Average Productivity ◽  
Thin Market ◽  
Asset Allocations ◽  
The Empirical Analysis

This paper investigates how trading frictions vary with the thickness of the asset market by examining patterns of asset allocations and prices in commercial aircraft markets. The empirical analysis indicates that assets with a thinner market are less liquid—i.e., more difficult to sell. Thus, firms hold on longer to them amid profitability shocks. Hence, when markets for assets are thin, firms' average productivity and capacity utilization are lower, and the dispersions of productivity and of capacity utilization are higher. In turn, prices of assets with a thin market are lower and have a higher dispersion. (JEL A12, L11, L93)

scholarly journals Appraisal of the Fischer-DiPasquale-Wheaton (FDW) real estate model and development of an integrated property and asset market model

2004 ◽  
Vol 7 (2) ◽  
pp. 341-367 ◽  
Author(s):  
H Du Toit ◽  
CE Cloete
Keyword(s):  
Real Estate ◽  
South African ◽  
Stochastic Equations ◽  
Market Model ◽  
Asset Markets ◽  
Asset Market ◽  
Model Configuration ◽  
Property Markets ◽  
Micro Foundations

This paper provides a concise overview of the development of an integrated property and asset market model (IPAMM) for South African property markets, utilising the Pretoria office market as case study. The IPAMM simulates the interrelationships between property and asset markets in a diagrammatic quadrant model configuration. The Fischer-DiPasquale-Wheaton (FDW) real estate model, arguably the most advanced diagrammatic quadrant real estate model available at present, served as basis for the development of IPAMM. IPAMM is essentially a regression model based on a system of stochastic equations that captures the interrelationships between property and asset markets. The model advances beyond mere conceptualisation of these relationships to a quantified interpretation and application of the theoretical premises that represent the micro-foundations of economic behaviour in property and asset markets.

scholarly journals International Real Estate Review

2011 ◽  
Vol 14 (2) ◽  
pp. 159-183
Author(s):  
Oliver Bischoff ◽  
Keyword(s):  
Household Income ◽  
Birth Rate ◽  
Flow Model ◽  
Positive Impact ◽  
Data Set ◽  
Rental Market ◽  
East German ◽  
Vacancy Rates ◽  
Stock Flow

We apply the stock flow model for the German residential rental market using a data set that includes the overwhelming majority of nomenclature of territorial units for statistics (NUTS) 3 regions for the 2004-2007 period. Aside from proving conditional rental price convergence, we have detected a turnaround in vacancy stocks between the short and the long term. While East German counties and West German independent cities currently exhibit the highest and lowest vacancy rates, respectively, the opposite holds true at equilibrium. Leaning on theoretical suggestions, landlords in well-developed areas have incentives to hold onto vacancies in view of future rent increases. Our results support this idea, which demonstrates the significantly positive impact of household income and net birth rate on the natural vacancy rate.

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