Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127253
Authors: 
Oechssler, Jörg
Schmidt, Carsten
Schnedler, Wendelin
Year of Publication: 
2009
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 439
Abstract: 
Bubbles in asset markets have been documented in numerous experimental studies. However, all experiments in which bubbles occur pay dividends after each trading day. In this paper we study whether bubbles can occur in markets without dividends. We investigate the role of two features that are present in real markets. (1) The mere possibility that some traders may have inside information, and (2) the option to communicate with other traders. We find that bubbles can indeed occur without dividends. Surprisingly, communication turns out to be counterproductive for bubble formation, whereas the possibility of inside information is, as expected, crucial.
Subjects: 
asset markets
bubbles
experiment
mirages
dividends
JEL: 
C92
G12
D8
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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