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Are you experienced? How the time spacing of traders' market experience impacts bubble formation in experimental asset markets

Shachat, J.; Wang, H.

Are you experienced? How the time spacing of traders' market experience impacts bubble formation in experimental asset markets Thumbnail


Authors

H. Wang



Contributors

S. Füllbrunn
Editor

E. Haruvy
Editor

Abstract

We demonstrate when market experience is spaced out over a longer period of time (weeks instead of minutes), the increase in pricing efficiency is very small - if at all - for the same population of traders. However pricing efficiency gains are substantial for a situation involving new trader cohorts and a new asset. This is demonstrated via controlled laboratory experiments which implement a setting that commonly leads to the formulation of pricing bubbles. In our first study, we compare massed cohorts who complete a sequence of three markets in a single experimental session, and spacing cohorts whose sequence of three markets are spaced a week apart.Massed cohorts do not generate larger bubbles than spaced cohorts in the first two markets, and there is weak evidence that they do in the third market. In contrast we find in an exploratory study, experience gained through spaced repetitions rather than massed repetitions generates smaller bubbles when subjects are recruited to new cohorts and participate in a market for a different asset.

Citation

Shachat, J., & Wang, H. (2022). Are you experienced? How the time spacing of traders' market experience impacts bubble formation in experimental asset markets. In S. Füllbrunn, & E. Haruvy (Eds.), Handbook of Experimental Finance (267-280). Edward Elgar Publishing. https://doi.org/10.4337/9781800372337.00028

Acceptance Date Aug 24, 2021
Online Publication Date Oct 18, 2022
Publication Date 2022
Deposit Date Aug 26, 2021
Publicly Available Date Apr 18, 2023
Publisher Edward Elgar Publishing
Pages 267-280
Book Title Handbook of Experimental Finance
ISBN 9781800372320
DOI https://doi.org/10.4337/9781800372337.00028
Public URL https://durham-repository.worktribe.com/output/1653535

Files

Accepted Book Chapter (656 Kb)
PDF

Copyright Statement
This is a draft chapter/article. The final version is available in Handbook of Experimental Finance edited by Füllbrunn, S. and Haruvy, E., published in 2022, Edward Elgar Publishing Ltd
https://doi.org/10.4337/9781800372337.00028

The material cannot be used for any other purpose without further permission of the publisher, and is for private use only.





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