Does risk sorting explain bubbles?

authors: Hubert J. Kiss, László Á. Kóczy, Ágnes Pintér, Balázs R. Sziklai

A recent stream of experimental economics literature studies the factors that contribute to the emergence of financial bubbles. We consider a setting where participants sorted according to their degree of risk aversion trade in experimental asset markets. We show that risk sorting is able to explain bubbles partially: Markets with the most risk-tolerant traders exhibit larger bubbles than markets with the most risk averse traders. In our study risk aversion does not correlate with gender or cognitive abilities, so it is an additional factor that helps understand bubbles.

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Alternative title:	Magyarázza-e a kockázatkereső magatartás a tőzsdebuborékok kialakulását?
Year of publication:	February 2019
Authors:	Kiss, Hubert J. ; Kóczy, László Á. ; Pintér, Ágnes ; Sziklai, Balázs R.
Publisher:	Budapest : Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences
Subject:	externalities \| experiment \| risk sorting \| asset bubble \| Spekulationsblase \| Bubbles \| Theorie \| Theory \| Risiko \| Risk \| Externer Effekt \| Externalities \| Experiment \| Börsenkurs \| Share price \| Schätzung \| Estimation \| CAPM