Abstract
Original language | English |
---|---|
Journal | Review of Financial Studies |
Publication status | E-pub ahead of print - 2019 |
Fingerprint
Cite this
}
Bubbles and Financial Professionals. / Weitzel, Utz; Huber, Christoph; Huber, Jürgen; Kirchler, Michael; Lindner, Florian; Rose, Julia.
In: Review of Financial Studies, 2019.Research output: Contribution to Journal › Article › Academic › peer-review
TY - JOUR
T1 - Bubbles and Financial Professionals
AU - Weitzel, Utz
AU - Huber, Christoph
AU - Huber, Jürgen
AU - Kirchler, Michael
AU - Lindner, Florian
AU - Rose, Julia
PY - 2019
Y1 - 2019
N2 - The efficiency of financial markets and 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.
AB - The efficiency of financial markets and 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.
M3 - Article
JO - Review of Financial Studies
JF - Review of Financial Studies
SN - 1465-7368
ER -