On the ingredients for bubble formation: Informed traders and communication

Oechssler, Jörg; Schmidt, Carsten; Schnedler, Wendelin

doi:10.1016/j.jedc.2011.05.009

Cited by 60 publications

(33 citation statements)

References 33 publications

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“…Second, we give participants portfolio information during the trading period, which allows them to condition their portfolio choices on those of others. Despite the differences, our findings are consistent with Oechssler et al (2011) in the sense that under the right circumstances, peer effects may reduce aggregate risk taking in asset markets.…”

Section: Peer Effects and Risk Sharing In Experimental Asset Markets supporting

confidence: 82%

“…This literature has hardly considered peer information, with the exception of Schoenberg and Haruvy (2012) and Oechssler et al (2011), who study the effect of information within the design of Smith et al (1988). Schoenberg and Haruvy (2012) show that seeing the earnings of the highest earning individual reduces satisfaction and increases the prevalence of price bubbles.…”

Section: Peer Effects and Risk Sharing In Experimental Asset Markets mentioning

confidence: 99%

“…Schoenberg and Haruvy (2012) show that seeing the earnings of the highest earning individual reduces satisfaction and increases the prevalence of price bubbles. Oechssler et al (2011) enable subjects to chat with one another during the trading phase. The authors observe that communication among peers reduces price bubbles, and suggest that communication with others reduces overconfidence about own abilities, thereby mitigating speculation and price bubbles.…”

Section: Peer Effects and Risk Sharing In Experimental Asset Markets mentioning

confidence: 99%

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Peer Effects and Risk Sharing in Experimental Asset Markets

2014

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Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. The consequences of social interactions are hard to isolate in financial data, and theoretically it is not clear whether peer effects should increase or decrease risk sharing. We design an experimental asset market with multiple risky assets and study how exogenous variation in real-time information about the portfolios of peer group members affects aggregate and individual risk taking. We find that peer information ameliorates under-diversification that occurs in a market without such information. One reason is that peer information increases risk aversion and induces a concern for relative income position that may reduce or amplify risk taking, depending on whether the context highlights the most or least successful trader. Thus, contrary to conventional wisdom, we show that social interactions may help to reduce earnings volatility in financial markets, and we discuss implications for institutional design. JEL-codes: D53, D83, G11.

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Section: Peer Effects and Risk Sharing In Experimental Asset Markets supporting

confidence: 82%

Section: Peer Effects and Risk Sharing In Experimental Asset Markets mentioning

confidence: 99%

Section: Peer Effects and Risk Sharing In Experimental Asset Markets mentioning

confidence: 99%

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Peer Effects and Risk Sharing in Experimental Asset Markets

2014

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“…U. Schmidt (2011), Michailova (2010), Krügel (2012), andOechssler, C. Schmidt, andSchnedler (2011) find that the size of bubbles and trading activity in SSW markets are, indeed, strongly correlated with overconfidence. Glaser and Weber (2007) and Biais et al (2005) find no or only very weak correlations with overconfidence.…”

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confidence: 98%

Bubbles in hybrid markets: How expectations about algorithmic trading affect human trading

Farjam

Kirchkamp

2018

Journal of Economic Behavior & Organization

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may

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“…(e.g. King, 1991;Oechssler et al, 2011). Unlike Smith et al (1988), many experimental studies have investigated the relationship between informational asymmetry among traders and market performance.…”

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confidence: 99%

Bubbles and Information in Continuous Double Auction and Call Market: An Experiment

Sakurai

Akiyama

2017

SSRN Journal

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To assess the effects of informational asymmetry among traders and of type of market institution on the emergence of price bubbles in asset markets, we investigate price dynamics in experimental markets not only under continuous double auctions (CDAs) but also under call markets (CMs). The results suggest that the effects of informational asymmetry on bubbles differ between CDAs and CMs. Specifically, informational asymmetry can contribute to the abatement of bubbles under CDAs as in Sutter et al. (2012), while it can contribute to promoting bubbles under CMs. JEL classification: C91, G11

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On the ingredients for bubble formation: Informed traders and communication

Cited by 60 publications

References 33 publications

Peer Effects and Risk Sharing in Experimental Asset Markets

Peer Effects and Risk Sharing in Experimental Asset Markets

Bubbles in hybrid markets: How expectations about algorithmic trading affect human trading

Bubbles and Information in Continuous Double Auction and Call Market: An Experiment

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