Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73500
Authors: 
Kirchler, Michael
Huber, Jürgen
Stöckl, Thomas
Year of Publication: 
2009
Series/Report no.: 
Working Papers in Economics and Statistics 2009-26
Abstract: 
For the past two decades a market model introduced by Smith, Suchanek, and Williams (1988, henceforth SSW) has dominated experimental research on financial markets. In SSW the fundamental value of the traded asset is determined by the expected value of a finite stream of dividend payments. This setup implies a deterministically falling fundamental value with a predetermined end of the life-span of the asset and extremely high dividend-payouts. We present a new market model in which we implement the fundamental value by adopting a random walk process. Compared to SSW-markets, prices in the new markets (SAVE) are more efficient and end-of-experiment imbalances common in SSW-markets are not observed. Our results demonstrate, that implicit features of the SSW market model contribute to bubble formation.
Subjects: 
Experimental economics
asset market
bubble
market efficiency
JEL: 
C92
D83
D84
G12
Document Type: 
Working Paper

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