Bubbles and Financial Professionals

120 Pages Posted: 16 Mar 2018 Last revised: 18 Apr 2019

See all articles by Utz Weitzel

Utz Weitzel

Utrecht University - Utrecht University School of Economics; Radboud University - Economics Department, IMR

Christoph Huber

University of Innsbruck

Juergen Huber

University of Innsbruck; University of Vienna - Department of Finance

Michael Kirchler

University of Innsbruck

Florian Lindner

Max Planck Institute for Research on Collective Goods

Julia Rose

University of Innsbruck

Date Written: March 14, 2019

Abstract

The efficiency of financial markets, but also their potential to produce bubbles are central topics in academic and professional debates. Yet, little is known about the contribution of financial professionals to price efficiency. We run 116 experimental markets with 412 professionals and 502 students. We find that professional markets with bubble-drivers - capital inflows or high initial capital supply - are susceptible to bubbles, although they are more efficient than student markets. In mixed markets with students, bubbles also occur, but professionals act as price stabilizers. We show that heterogeneous price beliefs drive overpricing, especially in bubble-prone market environments.

Keywords: Experimental finance, financial professionals, price efficiency, financial bubbles

JEL Classification: C92, D84, G02, G14

Suggested Citation

Weitzel, Utz and Huber, Christoph and Huber, Juergen and Kirchler, Michael and Lindner, Florian and Rose, Julia, Bubbles and Financial Professionals (March 14, 2019). Available at SSRN: https://ssrn.com/abstract=3139856 or http://dx.doi.org/10.2139/ssrn.3139856

Utz Weitzel (Contact Author)

Utrecht University - Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Radboud University - Economics Department, IMR ( email )

Nijmegen, 6500 HK
Netherlands

Christoph Huber

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

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Florian Lindner

Max Planck Institute for Research on Collective Goods ( email )

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

HOME PAGE: http://https://sites.google.com/site/florianlindner85/

Julia Rose

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Register to save articles to
your library

Register

Paper statistics

Downloads
123
Abstract Views
1,035
rank
225,847
PlumX Metrics