Before and After: The Impact of a Real Bubble Crash on Investors’ Trading Behavior in the Lab

Journal of Economic Behavior and Organization, Volume 95, November 2013, Pages 186–196.

12 Pages Posted: 10 Jan 2011 Last revised: 14 Nov 2014

See all articles by Binglin Gong

Binglin Gong

Fudan University - School of Management

Vivian Lei

University of Wisconsin at Milwaukee - Economics

Deng Pan

Xiamen University

Date Written: August 30, 2010

Abstract

We report the results of an experiment designed to study whether or not having experienced booms and crashes in naturally occurring asset markets affects subjects’ trading behavior in the lab. Active investors in the Shanghai Stock Exchange were recruited to participate in either the Boom treatment, conducted in June 2007 after the Shanghai Stock Exchange had had a bull market for almost 2 years, or the Crash treatment, conducted in August 2008 after the SSE composite index had plummeted almost 60% from its high reached in October 2007. We find that, compared to those in the Crash treatment, subjects in the Boom treatment were much more active when participating in our experimental asset markets in that they tended to made bigger trades and preferred to hold more shares than cash. These behavioral differences cannot be explained by the overconfidence hypothesis.

Keywords: experiment, asset market, experience, bubble

JEL Classification: C91, C93, G01, G11

Suggested Citation

Gong, Binglin and Lei, Vivian and Pan, Deng, Before and After: The Impact of a Real Bubble Crash on Investors’ Trading Behavior in the Lab (August 30, 2010). Journal of Economic Behavior and Organization, Volume 95, November 2013, Pages 186–196., Available at SSRN: https://ssrn.com/abstract=1736786 or http://dx.doi.org/10.2139/ssrn.1736786

Binglin Gong

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

HOME PAGE: http://www.fdsm.fudan.edu.cn/en/teacher/preview.aspx?uid=118716

Vivian Lei

University of Wisconsin at Milwaukee - Economics ( email )

3210 N. Maryland Avenue
Bolton Hall 818
Milwaukee, WI 53211
United States
414-229-6494 (Phone)
414-229-3860 (Fax)

Deng Pan (Contact Author)

Xiamen University ( email )

China

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