Working Paper No. 588

Bubbles and Experience: An Experiment on Speculation

Published: January 20, 2003Pages: 25Keywords: Asset Market; Bubble; Crash; Experience; Experiment; SpeculationJEL-codes: C92; G12

Bubbles and Experience: An Experiment on Speculation Martin Dufwenberg, Tobias Lindqvist and Evan Moore


We investigate experimentally how the share of experienced traders in double-auction asset markets affects trading, in particular the occurrence of bubble-crash pricing patterns. In each session, six subjects trade in three successive market rounds and gain experience. In a fourth round, depending on the treatment, two or four experienced subjects are replaced by inexperienced subjects. The results are compared to earlier findings when all traders were either inexperienced or experienced. We explore what can be learned by analogy between these laboratory findings and the performance of naturally occurring markets.

 

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Social Capital and Health

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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