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| Author: | Porter, D. P. Smith, V. L. |
| Title: | Stock Market Bubbles in the Laboratory |
| Journal: | Journal of behavioral finance
2003 : VOL. 4:1, p. 7-20 |
| Index terms: | STOCK MARKETS BUBBLES MODELS MODEL TESTING EXPECTATIONS |
| Language: | eng |
| Abstract: | Trading at prices above the fundamental value of an asset, i.e. a bubble, has been verified and replicated in laboratory asset markets for the past seven years. To date, only common group experience provides minimal conditions for common investor sentiment and trading at fundamental value. Rational expectations models do not predict the bubble and crash phenomena found in these experimental markets; such models yield only equilibrium predictions and do not articulate a dynamic process that converges to fundamental value with experience. This paper reviews the results of 72 laboratory asset market experiments which include experimental treatments for dampening bubbles that are suggested by rational expectations theory or popular policy prescriptions. |
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