Bao, Te, Hennequin, Myrna, Hommes, Cars and Massaro, Domenico (2020) Coordination on bubbles in large-group asset pricing experiments. Journal of Economic Dynamics and Control, 110. a103702 1-29. ISSN 0165-1889

PDF - Accepted Version Available under License Creative Commons Attribution-NonCommercial No Derivatives. Download (825kB)

Abstract

We present a large-group experiment in which participants predict the price of an asset, whose realization depends on the aggregation of individual forecasts. The markets consist of 21 to 32 participants, a group size larger than in most experiments. Multiple large price bubbles occur in six out of seven markets. The bubbles emerge even faster than in smaller markets. Individual forecast errors do not cancel out at the aggregate level, but participants coordinate on a trend-following prediction strategy that gives rise to large bubbles. The observed price patterns can be captured by a behavioral heuristics switching model with heterogeneous expectations.

Item Type:	Article
Keywords:	Experimental economics, Asset price bubbles, Heterogeneous expectations, Heuristics switching
Schools and Departments:	University of Sussex Business School > Economics
SWORD Depositor:	Mx Elements Account
Depositing User:	Mx Elements Account
Date Deposited:	08 Apr 2021 10:53
Last Modified:	24 May 2021 01:00
URI:	http://sro.sussex.ac.uk/id/eprint/98195

View download statistics for this item

📧 Request an update