Super-exponential bubbles in lab experiments: Evidence for anchoring over-optimistic expectations on price

We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster than exponential due to positive feedback. We show that the positive feedback operates by traders continuously upgrading their over-optimistic expectations of future returns based on past prices rather than on realized returns.

MoreLess

Year of publication:	2013
Authors:	Hüsler, A. ; Sornette, D. ; Hommes, C.H.
Published in:	Journal of Economic Behavior & Organization. - Elsevier, ISSN 0167-2681. - Vol. 92.2013, C, p. 304-316
Publisher:	Elsevier
Subject:	Anchoring \| Financial bubbles \| Laboratory experiments \| Speculation \| Super-exponential growth \| Positive feedback

More details

Type of publication:	Article
Classification:	C92 - Laboratory; Group Behavior ; D84 - Expectations; Speculations ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011048172