Bubble Formation and (In)Efficient Markets in Learning-to-Forecast and -optimise Experiments

Arbeitspapier

This experiment compares the price dynamics and bubble formation in an asset market with a price adjustment rule in three treatments where subjects (1) submit a price forecast only, (2) choose quantity to buy/sell and (3) perform both tasks. We find deviation of the market price from the fundamental price in all treatments, but to a larger degree in treatments (2) and (3). Mispricing is therefore a robust finding in markets with positive expectation feedback. Some very large, recurring bubbles arise, where the price is 3 times larger than the fundamental value, which were not seen in former experiments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 15-107/II

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Design of Experiments: Laboratory, Group Behavior ; General Equilibrium and Disequilibrium: Financial Markets ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations
• Subject: Financial Bubbles ; Experimental Finance ; Rational Expectations ; Learning to Forecast ; Learning to Optimize

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bao, Te ; Hommes, Cars ; Makarewicz, Tomasz
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/125108
• Last update: 10.03.2025, 11:43 AM CET