Seminar: Experience Does not Eliminate Bubbles: Experimental Evidence
On Tuesday January 14th 2020, Anita Kopányi-Peuker (CPB) will give a presentation titled: "Experience Does not Eliminate Bubbles: Experimental Evidence"
We study the role of experience in the formation of asset price bubbles. Therefore, we conduct two related experiments. One is a call market experiment in which participants trade assets with each other. The other is a learning-to-forecast experiment in which participants only forecast future prices, while the trade, which is based on these forecasts, is computerized. Each experiment comprises three treatments varying the amount of information that participants receive about the fundamental value. Each market is repeated three times. In both experiments and in all treatments, we observe sizable bubbles. These bubbles do not disappear with experience. Our findings in the call market experiment stand in contrast to the literature. Our findings in the learning-to-forecast experiment are novel. Interestingly, we observe flat bubbles in the call market experiment and boom-and-bust cycles in the learning-to-forecast experiment.