Experience Does not Eliminate Bubbles: Experimental Evidence

Anita Kopányi-Peuker and Matthias Weber

No 18-092/II, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We study the role of experience in the formation of asset price bubbles. Therefore, we conduct two related experiments. One is a call market experiment in which participants trade assets with each other. The other is a learning-to-forecast experiment in which participants only forecast future prices, while the trade, which is based on these forecasts, is computerized. Each experiment comprises three treatments that vary the amount of information about the fundamental value that participants receive. Each market is repeated three times. In both experiments and in all treatments, we observe sizable bubbles. These bubbles do not disappear with experience. Our findings in the call market experiment stand in contrast to the literature. Our findings in the learning-to-forecast experiment are novel. Interestingly, the shape of the bubbles is different between the two experiments. We observe flat bubbles in the call market experiment and boom-and-bust cycles in the learning-to-forecast experiment.

Keywords: Experimental finance; asset market experiment; asset pricing; behavioral finance; bubbles; experience. (search for similar items in EconPapers)
JEL-codes: C92 D53 D90 G40 (search for similar items in EconPapers)
Date: 2018-11-20
New Economics Papers: this item is included in nep-exp and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Experience Does Not Eliminate Bubbles: Experimental Evidence (2021)
Working Paper: Experience Does not Eliminate Bubbles: Experimental Evidence (2018)
Working Paper: Experience Does not Eliminate Bubbles: Experimental Evidence (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20180092

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