Bubbles and Crashes in Experimental Asset Markets

  • Stefan Palan

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 626)

Table of contents

  1. Front Matter
    Pages i-xv
  2. Stefan Palan
    Pages 1-9
  3. Stefan Palan
    Pages 11-65
  4. Stefan Palan
    Pages 67-85
  5. Stefan Palan
    Pages 87-136
  6. Stefan Palan
    Pages 137-142
  7. Stefan Palan
    Pages 143-157
  8. Back Matter
    Pages 159-171

About this book

Introduction

This book describes a laboratory experiment designed to test the causes and properties of bubbles in financial markets and explores the question whether it is possible to design markets which avoid such bubbles and crashes.  In the experiment, subjects were given the opportunity to trade in a stock market modeled after the seminal work of Smith et al. (1988). To account for the increasing importance of online betting sites, subjects were also allowed to trade in a digital option market. The outcomes shed new light on how subjects form and update their expectations, placing special emphasis on the bounded rationality of investors. Various analytical bubble measures found in the literature are collected, calculated, classified and presented for the first time. The very interesting new bubble measures "Dispersion Ratio", "Overpriced Transactions" and "Underpriced Transactions" are developed, making the book an important step towards the research goal of preventing bubbles and crashes in financial markets. In addition, the book formulates concrete new research hypotheses for future studies.

Keywords

Adaptive Learning Bubbles Experimental Asset Market Financial Market Financial Markets Irrationality

Authors and affiliations

  • Stefan Palan
    • 1
  1. 1.Fak. Sozial-/Wirtschaftswiss.Universität GrazGrazAustria

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-642-02147-3
  • Copyright Information Springer-Verlag Berlin Heidelberg 2009
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-642-02146-6
  • Online ISBN 978-3-642-02147-3
  • Series Print ISSN 0075-8442
  • About this book