Individual Speculative Behavior and Overpricing in Experimental Asset Markets

Released on by Dirk-Jan Janssen
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  • Individual Speculative Behavior and Overpricing in Experimental Asset Markets Book Detail

  • Author : Dirk-Jan Janssen
  • Release Date : 2018
  • Publisher :
  • Genre :
  • Pages : 21
  • ISBN 13 :
  • File Size : 96,96 MB
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Individual Speculative Behavior and Overpricing in Experimental Asset Markets by Dirk-Jan Janssen PDF Summary

Book Description: A rich history of theoretical models in finance shows that speculation can lead to overpricing and price bubbles. We provide evidence that, indeed, individual speculative behavior fuels overpricing in (experimental) asset markets. In a first step, we elicit individual speculative behavior in a one-shot setting with a novel Speculation Elicitation Task (SET). In a second step, we use this measure of speculative behavior to compose dynamic, continuous double auction markets in line with Smith, Suchanek, and Williams (1988). We find significant higher overpricing in markets with traders who exhibited more speculative behavior in the individual SET. However, we find no such differences in overpricing when we test for alternative explanations, using a market environment introduced by Lei, Noussair, and Plott (2001) where speculation is impossible. Taken together, our results corroborate the notion that speculation is an important factor in overpricing and bubble formation if market environments allow for the pursuit of capital gains.

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