Peaks and Valleys: Experimental Asset Markets with Non-Monotonic Fundamentals

Noussair, Charles N.; Powell, Owen

doi:10.2139/ssrn.1137522

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Peaks and Valleys: Experimental Asset Markets with Non-Monotonic Fundamentals

CentER Discussion Paper Series No. 2008-49

41 Pages Posted: 27 May 2008

See all articles by Charles N. Noussair

Owen Powell

University of Vienna - Department of Economics; Vienna Center for Experimental Economics

Date Written: April 2008

Abstract

We report the results of an experiment designed to measure how well asset market prices track fundamentals when the latter experience peaks and troughs. We observe greater price efficiency in markets in which fundamentals rise to a peak and then decline, than in markets in which fundamentals decline to a trough and undergo a subsequent increase. The findings demonstrate that the characteristics of the time path of the fundamental value can influence the degree of market efficiency.

Keywords: bubble, peak, experiment

JEL Classification: C9, G10

Suggested Citation: Suggested Citation

Noussair, Charles N. and Powell, Owen, Peaks and Valleys: Experimental Asset Markets with Non-Monotonic Fundamentals (April 2008). CentER Discussion Paper Series No. 2008-49, Available at SSRN: https://ssrn.com/abstract=1137522 or http://dx.doi.org/10.2139/ssrn.1137522