Skip to main content

Multi-period experimental asset markets with distinct fundamental value regimes

An Erratum to this article was published on 09 May 2015


In this methodological study we analyze price adjustment processes in multi-period laboratory asset markets with five distinct fundamental value \((\hbox {FV})\) regimes in a unified framework. Minimizing the effect of between-treatment variations we run markets with deterministically decreasing, constant, randomly fluctuating and—as main innovation—markets with deterministically increasing \(\hbox {FV}\)s. We find (i) efficient pricing in markets with constant \(\hbox {FV}\)s, (ii) overvaluation in markets with decreasing \(\hbox {FV}\)s, and (iii) undervaluation in markets with increasing \(\hbox {FV}\)s. (iv) Markets with randomly fluctuating fundamentals show overvaluation when \(\hbox {FV}\)s predominantly decline and undervaluation when \(\hbox {FV}\)s are mostly upward-sloping. Finally, we document that (v) bid-ask spreads and volatility of price changes are positively correlated with mispricing across regimes. The main contribution of the paper is to provide clean comparisons between distinct \(\hbox {FV}\) regimes, in particular between markets with increasing \(\hbox {FV}\)s and other regimes.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2


  1. 1.

    See e.g. Noussair et al. (1998), Haruvy and Noussair (2006), Noussair and Tucker (2006), Hanke et al. (2010), Huber et al. (2011), Kirchler et al. (2011), Huber et al. (2012).

  2. 2.

    Due to technical problems two markets had to be ended early. Market 4 of \(\hbox {R1}(\backslash )\) and market 2 of R2(—) ended after period 11 and period 12, respectively. Because calculation of RAD and RD allow for different numbers of periods we do not expect any consequences for the interpretation of the results.

  3. 3.

    Results are based on pooled data as we do not have sufficient data on the treatment level.

  4. 4.

    Noussair et al. (2001) report some bubble activity leading them to conclude that constant \(\hbox {FV}\)s cannot completely eliminate bubbles.


  1. Abarbanell, J. S., & Bernard, V. L. (1992). Tests of analysts’ overreaction/underreaction to earnings information as an explanation for anomalous stock price behavior. The Journal of Finance, 47(3), 1181–1207.

    Article  Google Scholar 

  2. Amir, E., & Ganzach, Y. (1998). Overreaction and underreaction in analysts’ forecasts. Journal of Economic Behavior and Organization, 37, 333–347.

    Article  Google Scholar 

  3. Ball, S. B., & Holt, C. A. (1998). Classroom games: Speculation and bubbles in an asset market. Journal of Economic Perspectives, 12(1), 207–218.

    Article  Google Scholar 

  4. Bernard, V. L. (1990). Evidence that stock prices do not fully reflect the implications of current earnings for future earnings. Journal of Accounting and Economics, 13, 305–340.

    Article  Google Scholar 

  5. Bostian, A. J., Goeree, J., & Holt, C. A. (2005). Price bubbles in asset market experiments with a flat fundamental value. Working paper prepared for the Experimental Finance Conference.

  6. Bostian, A. J., & Holt, C. A. (2009). Price bubbles with discounting: A web-based classroom experiment. The Journal of Economic Education, 40(1), 27–37.

    Article  Google Scholar 

  7. Breaban, A., & Noussair, C. N. (2014). Fundamental value trajectories and trader characteristics in an asset market experiment. CentER Working paper No. 2014–010.

  8. Caginalp, G., Porter, D., & Smith, V. (1998). Initial cash/asset ratio and asset prices: An experimental study. PNAS USA, 95, 756–761.

    Article  Google Scholar 

  9. Caginalp, G., Porter, D., & Smith, V. (2001). Financial bubbles: Excess cash, momentum and incomplete information. The Journal of Psychology and Financial Markets, 2(2), 80–99.

    Article  Google Scholar 

  10. Cheung, S. L., Hedegaard, M., & Palan, S. (2012). To see is to believe: Common expectations in experimental asset markets. IZA Discussion Paper No 6922.

  11. Chopra, N., Lakonishok, J., & Ritter, J. R. (1992). Measuring abnormal performance: Do stocks overreact? Journal of Financial Economics, 31, 235–268.

    Article  Google Scholar 

  12. DeBondt, W. F. M., & Thaler, R. H. (1985). Does the stock market overreact? The Journal of Finance, 40, 793–808.

    Article  Google Scholar 

  13. DeBondt, W. F. M., & Thaler, R. H. (1987). Further evidence on investor overreaction and stock market seasonality. The Journal of Finance, 42, 557–581.

    Article  Google Scholar 

  14. Dufwenberg, M., Lindqvist, T., & Moore, E. (2005). Bubbles and experience: An experiment. The American Economic Review, 95(5), 1731–1737.

    Article  Google Scholar 

  15. Fischbacher, U. (2007). Z-tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178.

    Article  Google Scholar 

  16. Gillette, A. B., Stevens, D. E., Watts, S. G., & Williams, A. W. (1999). Price and volume reactions to public information releases: An experimental approach incorporating traders’ subjective beliefs. Contemporary Accounting Research, 16(3), 437–479.

    Article  Google Scholar 

  17. Giusti, G., Jiang, J. H., & Xu, Y. (2012). Eliminating laboratory asset bubbles by paying interest on cash. MPRA Paper no. 37321.

  18. Greiner, B. (2004). Forschung und wissenschaftliches Rechnen 2003, An Online Recruitment System for Economic Experiments. GWDG Bericht 63 (pp. 79–93). Gesellschaft fuer Wissenschaftliche Datenverarbeitung, Goettingen.

  19. Hanke, M., Huber, J., Kirchler, M., & Sutter, M. (2010). The economic consequences of a tobin tax: An experimental analysis. Journal of Economic Behavior and Organization, 74, 58–71.

    Article  Google Scholar 

  20. Harris, T. S., & Ohlson, J. A. (1990). Accounting disclosures and the markets valuation of oil and gas properties: Evaluation of market efficiency and functional fixation. The Accounting Review, 65, 764–780.

    Google Scholar 

  21. Haruvy, E., Lahav, Y., & Noussair, C. (2007). Traders’ expectations in asset markets: Experimental evidence. The American Economic Review, 97(5), 1901–1920.

    Article  Google Scholar 

  22. Haruvy, E., & Noussair, C. N. (2006). The effect of short selling on bubbles and crashes in experimental spot asset markets. The Journal of Finance, 61(3), 1119–1157.

    Article  Google Scholar 

  23. Huber, J., Kleinlercher, D., & Kirchler, M. (2011). The impact of a financial transaction tax on stylized facts of price returns: Evidence from the lab. Journal of Economic Dynamics and Control, 36, 1248–1266.

    Article  Google Scholar 

  24. Huber, J., & Kirchler, M. (2012). The impact of instructions and procedure on reducing confusion and bubbles in experimental asset market. Experimental Economics, 15, 89–105.

    Article  Google Scholar 

  25. Huber, J., Kirchler, M., Kleinlercher, D., & Sutter, M. (2012). Market vs. residence principle: Experimental evidence on the effects of a financial transaction tax. Working paper.

  26. Johnson, D., & Joyce, P. (2012). Bubbles and crashes revisited. Review of Economics, 2(3), 29–42.

    Google Scholar 

  27. Kirchler, M. (2009). Underreaction to fundamental information and asymmetry in mispricing between bullish and bearish markets. An experimental study. Journal of Economic Dynamics and Control, 33, 491–506.

    Article  Google Scholar 

  28. Kirchler, M., Huber, J., & Kleinlercher, D. (2011). Market microstructure matters when imposing a tobin tax: Evidence from laboratory experiments. Journal of Economic Behavior and Organisation, 80(3), 586–602.

    Article  Google Scholar 

  29. Kirchler, M., Huber, J., & Stöckl, T. (2012). Thar she bursts: reducing confusion reduces bubbles. The American Economic Review, 102(2), 865–883.

    Article  Google Scholar 

  30. Lei, V., & Vesely, F. (2009). Market efficiency: Evidence from a no-bubble asset market experiment. Pacific Economic Review, 14(2), 246–258.

    Article  Google Scholar 

  31. Noussair, C. N., & Powell, O. (2010). Peaks and valleys: Price discovery in experimental asset markets with non-monotonic fundamentals. Journal of Economic Studies, 37(2), 152–180.

    Article  Google Scholar 

  32. Noussair, C. N., Robin, S., & Ruffieux, B. (1998). The effects of transaction costs on double auction markets. Journal of Economic Behavior and Organization, 36, 221–233.

    Article  Google Scholar 

  33. Noussair, C. N., Robin, S., & Ruffieux, B. (2001). Price bubbles in laboratory asset markets with constant fundamental values. Experimental Economics, 4, 87–105.

    Article  Google Scholar 

  34. Noussair, C. N., & Tucker, S. (2006). Futures markets and bubble formation in experimental asset markets. Pacific Economic Review, 11(2), 167–184.

    Article  Google Scholar 

  35. Oechssler, J. (2010). Searching beyond the lamppost: Let’s focus on economically relevant questions. Journal of Economic Behavior and Organization, 73, 65–67.

    Article  Google Scholar 

  36. Palan, S. (2013). A review of bubbles and crashes in experimental asset markets. Journal of Economic Surveys, 27(3), 570–588.

    Article  Google Scholar 

  37. Plott, C., & Sunder, S. (1982). Efficiency of experimental security markets with insider information: An application of rational-expectations models. Journal of Political Economy, 90, 663–698.

    Article  Google Scholar 

  38. Scheinkman, J. A., & Xiong, W. (2003). Overconfidence and speculative bubbles. Journal of Political Economy, 111, 1183–1219.

    Article  Google Scholar 

  39. Shiller, R. J. (1981). Do stock prices move too much to be justified by subsequent changes in dividends? The American Economic Review, 71(3), 421–436.

    Google Scholar 

  40. Smith, V. L. (1982). Markets as economizers of information: Experimental examination of the ’hayek hypothesis’. Economic Inquiry, 20, 165–179.

    Article  Google Scholar 

  41. Smith, V., van Boening, M., & Wellford, C. P. (2000). Dividend timing and behavior in laboratory asset markets. Economic Theory, 16, 567–583.

    Google Scholar 

  42. Smith, V. L. (1962). An experimental study of competitive market behavior. The Journal of Political Economy, 70(2), 111–137.

    Article  Google Scholar 

  43. Smith, V. L. (2010). Theory and experiment: What are the questions? Journal of Economic Behavior and Organization, 73, 3–15.

    Article  Google Scholar 

  44. Smith, V. L., Suchanek, G. L., & Williams, A. W. (1988). Bubbles, crashes, and endogenous expectations in experimental spot asset markets. Econometrica, 56(5), 1119–1151.

    Article  Google Scholar 

  45. Stevens, D. E., & Williams, A. W. (2004). Inefficiency in earnings forecasts: Experimental evidence of reactions to positive vs. negative information. Experimental Economics, 7, 75–92.

    Article  Google Scholar 

  46. Stöckl, T., Huber, J., & Kirchler, M. (2010). Bubble measures in experimental asset markets. Experimental Economics, 13, 284–298.

    Article  Google Scholar 

  47. Sutter, M., Huber, J., & Kirchler, M. (2012). Bubbles and information: An experiment. Management Science, 58, 384–393.

    Article  Google Scholar 

  48. Van Boening, M., Williams, A. W., & La Master, S. (1993). Price bubbles and crashes in experimental call markets. Economics Letters, 41(2), 179–185.

    Article  Google Scholar 

Download references


We thank participants of SAET 2011 and Experimental Finance 2011 for helpful comments. Financial support by the Austrian National Bank (OeNB-Grants 12789 and 14953), the Austrian Science Foundation (FWF-Grant 20609 and FWF-Grant 22400, START-Grant Y617-G11), and the University of Innsbruck (Nachwuchsförderung Stöckl) is gratefully acknowledged.

Author information



Corresponding author

Correspondence to Thomas Stöckl.

Electronic supplementary material



Appendix 1: Individual market results

See Table 5.

Table 5 Individual market results for RAD, RD, SPREAD, VOLA and ST for regimes \(\hbox {R1}(\backslash )\) to \(\hbox {R5}(\mathcal {\hbox {N}})\)

Appendix 2: Time series of transaction prices by treatments

Markets of R1\(\left( \backslash \right) \)

See Fig. 3.

Fig. 3

Fundamental value (\(\hbox {FV}\), bold line) and individual transaction prices (black line with circles) as a function of transaction time for markets 1–6 of \(\hbox {R1}(\backslash )\)

Markets of R2(—)

See Fig. 4.

Fig. 4

Fundamental value (\(\hbox {FV}\), bold line) and individual transaction prices (black line with circles) as a function of transaction time for markets 1–6 of R2(—)

Markets of R3(/)

See Fig. 5.

Fig. 5

Fundamental value (\(\hbox {FV}\), bold line) and individual transaction prices (black line with circles) as a function of transaction time for markets 1–6 of \(\hbox {R}3(/)\)

Markets of R4(tri)

See Fig. 6.

Fig. 6

Fundamental value (\(\hbox {FV}\), bold line) and individual transaction prices (black line with circles) as a function of transaction time for markets 1–6 of \(\hbox {R4(tri)}\)

Markets of R5\((\mathcal {{N}})\)

See Fig. 7.

Fig. 7

Fundamental value (\(\hbox {FV}\), bold line) and individual transaction prices (black line with circles) as a function of transaction time for markets 1–6 of \(\hbox {R5}(\mathcal {\hbox {N}})\)

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Stöckl, T., Huber, J. & Kirchler, M. Multi-period experimental asset markets with distinct fundamental value regimes. Exp Econ 18, 314–334 (2015).

Download citation


  • Experimental finance
  • Asset market
  • Bubble
  • Market efficiency
  • Fundamental value

JEL Classification

  • C92
  • D84
  • G10