Peaks and Valleys: Experimental Asset Markets With Non-Monotonic Fundamentals

C.N. Noussair, O.R. Powell

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Abstract

We report the results of an experiment designed to measure how well asset market prices track fundamentals when the latter experience peaks and troughs. We observe greater price efficiency in markets in which fundamentals rise to a peak and then decline, than in markets in which fundamentals decline to a trough and undergo a subsequent increase. The findings demonstrate that the characteristics of the time path of the fundamental value can influence the degree of market efficiency.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages41
Volume2008-49
Publication statusPublished - 2008

Publication series

NameCentER Discussion Paper`
Volume2008-49

Keywords

  • Bubble
  • Peak
  • Experiment

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