Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97841
Authors: 
Baghestanian, Sascha
Walker, Todd B.
Year of Publication: 
2014
Series/Report no.: 
SAFE Working Paper Series 54
Abstract: 
We investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets. We show that setting a visual anchor at the fundamental value (FV) in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets. If no FV-anchor is set, bubble-crash patterns emerge. Our results indicate that bubbles in laboratory environments are primarily sparked in the first period. If prices are initiated around the FV, they stay close to the FV over the entire trading horizon. Our insights can be related to initial public offerings and the interaction between prices set on pre-opening markets and subsequent intra-day price dynamics.
Subjects: 
Experimental Asset Markets
Anchoring
Bubbles
JEL: 
C90
C91
D03
G02
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
909.11 kB





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