Asset Characteristics and Boom and Bust Periods: An Experimental Study

Real Estate Economics, June 2012

Posted: 19 Apr 2011

See all articles by Nuriddin Ikramov

Nuriddin Ikramov

California State University, Sacramento

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Date Written: April 18, 2011

Abstract

We examine the impact of transaction costs, short selling restrictions and divisibility of assets on market efficiency in experimental asset markets. We find that transaction costs do not exacerbate the inefficiency of the market. They reduce the magnitude of bubbles and push prices closer to fundamentals. More divisible assets exhibit smaller deviations of prices from fundamentals. Short selling restrictions contribute to prolonged bubbles, while relaxing them increases the occurrence of "bust cycles." We also find that experimental real estate markets display larger deviations of prices from fundamental values, longer boom and bust cycles and smaller turnover than experimental financial markets.

Keywords: boom and bust periods, real estate, financial assets

Suggested Citation

Ikramov, Nuriddin and Yavas, Abdullah, Asset Characteristics and Boom and Bust Periods: An Experimental Study (April 18, 2011). Real Estate Economics, June 2012. Available at SSRN: https://ssrn.com/abstract=1814228

Nuriddin Ikramov

California State University, Sacramento ( email )

6000 J Street
Sacramento, CA 95819-6082
United States

Abdullah Yavas (Contact Author)

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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