Bubbles and Information: An Experiment

University of Innsbruck Working Paper No. 2008-20

53 Pages Posted: 16 Sep 2008

See all articles by Matthias Sutter

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Michael Kirchler

University of Innsbruck

Juergen Huber

University of Innsbruck; University of Vienna - Department of Finance

Date Written: September 16, 2008

Abstract

We study whether information about imminent future dividends can abate bubbles in experimental asset markets. Using the seminal design of Smith et al. (1988) we find that markets where traders are asymmetrically informed about future dividends have smaller, and shorter, bubbles than markets with symmetrically informed or uninformed traders. Hence, fundamental values are better reflected in market prices - implying higher market efficiency - when some traders know more than others about the future prospects of an asset. We also find that asymmetric information has a similar abating impact on bubbles as when uninformed traders accumulate experience, though for different reasons.

Keywords: Bubbles, information, experiment

JEL Classification: C91, D83

Suggested Citation

Sutter, Matthias and Kirchler, Michael and Huber, Juergen, Bubbles and Information: An Experiment (September 16, 2008). University of Innsbruck Working Paper No. 2008-20. Available at SSRN: https://ssrn.com/abstract=1268742 or http://dx.doi.org/10.2139/ssrn.1268742

Matthias Sutter (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Juergen Huber

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

University of Vienna - Department of Finance ( email )

Bruenner Strasse 72
Vienna, 1210
Austria

Register to save articles to
your library

Register

Paper statistics

Downloads
230
rank
130,609
Abstract Views
1,617
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information