Cross-Impact and Price Bubbles : A Two-Asset Lab-Experiment

We investigate cross-impact in a hybrid experimental market, featuring both human and artificial agents. We exogenously vary across two treatments the available liquidity for trading. In treatment Separated participants have one distinct portfolio for each one of two stocks (markets are segmented), while in Unique participants have a unique portfolio, i.e., they can freely move their capital from one asset to the other. We observe larger financial bubbles for the speculative asset and larger (asymmetric) cross-market impact when participants have a unique portfolio. By comparing experimental with synthetic data and distinguishing between types of player activity, we can attribute cross-impact to human players, especially when the fundamental values of the two stocks are closer to each other, as well as to artificial players’ reaction to human presence