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)

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 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 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 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.

Dot.com Price Bubble for the Venture Capital Growth of Digital Companies

2020 ◽  
pp. 200-220
Author(s):  
Ceren Oral ◽  
Göktuğ Cenk Akkaya
Keyword(s):  
Venture Capital ◽  
Digital Technology ◽  
Digital Technologies ◽  
Risk Capital ◽  
Price Bubbles ◽  
Technology Sector ◽  
Price Bubble ◽  
Capital Growth ◽  
In The Beginning ◽  
Dot Com

Today, innovation performance is an important determinant of competition power and national progress. In the beginning of major innovation, new firms are created to benefit from new digital technologies, and investment and employment in the related industries is increasing. Venture capital (VC) plays an important role in financing venture businesses in the high digital technology sector. The VC market is now accessible at any point in history for ventures. Partly due to the rise of digital entrepreneur incubators, risk capitalists have spread throughout the spectrum. The new digital technology creates an almost constant balloon known as “tech bubble” or “dot com bubble,” which caused economic turmoil in the American stock market in the late '90s. Venture capital companies will be informed about market activity, price bubble history, risk capital, and price bubbles that can have a major impact on their business.

Price bubbles, gender, and expectations in experimental asset markets

2017 ◽  
Vol 100 ◽  
pp. 72-94 ◽  
Author(s):  
Charles A. Holt ◽  
Megan Porzio ◽  
Michelle Yingze Song
Keyword(s):  
Asset Markets ◽  
Price Bubbles ◽  
Experimental Asset Markets

scholarly journals TRANSACTION SERVICES AND ASSET-PRICE BUBBLES

2008 ◽  
Vol 12 (3) ◽  
pp. 378-403
Author(s):  
KEIICHIRO KOBAYASHI
Keyword(s):  
Resource Allocation ◽  
Steady State ◽  
Asset Price ◽  
Equilibrium Concept ◽  
Asset Price Bubbles ◽  
Price Bubbles ◽  
Equilibrium Allocation ◽  
Price Bubble ◽  
Transaction Services ◽  
Self Reference

This paper examines asset-price bubbles in an economy where a nondepletable asset (e.g., land) can provide transaction services, using a variant of the cash-in-advance model. When a landowner can borrow money immediately using land as collateral, one can say that land essentially provides a transaction service. The transaction services that such an asset can provide increase as its price rises, as the asset owner can borrow more money against the asset's increased value. Thus, an asset-price bubble can emerge due to the externality of self-reference, wherein the asset price reflects the transaction services that it can provide, whereas the amount of the transaction services reflects the asset price. If the collateral ratio of the asset (θ) and money supply (m) are not very large, a steady-state equilibrium exists where the asset price has a bubble component and resource allocation is inefficient; if θ and/or m become large, the bubble component of the asset price vanishes and the equilibrium allocation becomes efficient. The paper shows that in the case where the equilibrium concept is relaxed to allow for sticky prices and a temporary supply-demand gap, an equilibrium exists where a bubble develops temporarily and eventually bursts.

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