Asset Characteristics and Boom and Bust Periods: An Experimental Study

34 Pages Posted: 25 Aug 2012

See all articles by Nuriddin Ikromov

Nuriddin Ikromov

affiliation not provided to SSRN

Abdullah Yavas

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

Date Written: Fall 2012

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.

Suggested Citation

Ikromov, Nuriddin and Yavas, Abdullah, Asset Characteristics and Boom and Bust Periods: An Experimental Study (Fall 2012). Real Estate Economics, Vol. 40, Issue 3, pp. 603-636, 2012. Available at SSRN: https://ssrn.com/abstract=2135979 or http://dx.doi.org/10.1111/j.1540-6229.2012.00333.x

Nuriddin Ikromov (Contact Author)

affiliation not provided to SSRN ( email )

Abdullah Yavas

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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