An Experimental Study of Bubble Formation




2 views

Unformatted text preview:

An Experimental Study of Bubble Formation in Asset Markets Using the T tonnement Trading Institution Volodymyr Lugovskyy a Daniela Puzzello b and Steven Tucker c a b Department of Economics Georgia Institute of Technology USA Department of Economics University of Illinois at Urbana Champaign USA c Department of Economics University of Canterbury New Zealand September 2010 Abstract We report the results of an experiment designed to study the role of institutional structure in the formation of bubbles and crashes in laboratory asset markets In a setting employing double auctions and call markets as trading institutions bubbles and crashes are a quite robust phenomenon The only factor appearing to reduce bubbles is experience across markets In this study we employ the t tonnement trading institution which has not been previously explored in laboratory asset markets despite its historical and contemporary relevance The results show that bubbles are significantly reduced suggesting that the trading institution plays a crucial role in the formation of bubbles Keywords Experimental Asset Markets Price Bubbles Trading Institutions T tonnement Corresponding author Address Department of Economics University of Canterbury Private Bag 4800 Christchurch New Zealand 8015 phone 64 3 3642521 fax 64 3 3642635 e mail steven tucker canterbury ac nz Acknowledgements We thank the participants at the 4th Australian Workshop on Experimental Economics and MODSIM09 International Congress on Modelling and Simulation and seminar participants at the Purdue University and University of Pittsburgh for helpful comments and suggestions The research was conducted at the New Zealand Experimental Economics Laboratory NZEEL and supported by the University of Canterbury College of Business and Economics 0 1 Introduction Price bubbles are not a rare phenomenon Indeed there are many historical examples of commodity or financial asset markets that have experienced a period of sharp rising prices followed






Loading Unlocking...
Login

Join to view An Experimental Study of Bubble Formation and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view An Experimental Study of Bubble Formation and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?