Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73536
Authors: 
Kirchler, Michael
Huber, Jürgen
Stöckl, Thomas
Year of Publication: 
2011
Series/Report no.: 
Working Papers in Economics and Statistics 2011-08
Abstract: 
To explore why bubbles frequently emerge in the experimental asset market model of Smith, Suchanek and Williams (1988), we vary the fundamental value process (constant or declining) and the cash-to-asset value-ratio (constant or increasing). We observe high mispricing in treatments with a declining fundamental value, while overvaluation emerges when coupled with an increasing C/A-ratio. A questionnaire reveals that the declining fundamental value process confuses subjects, as they expect the fundamental value to stay constant.Running the experiment with a different context (stocks of a depletable gold mine instead of stocks) significantly reduces mispricing and overvaluation as it reduces confusion.
Subjects: 
Experimental economics
asset market
bubble
market efficiency
confusion
JEL: 
C91
D03
Document Type: 
Working Paper

Files in This Item:
File
Size
618.98 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.