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The "inflow-effect"-Trader inflow and price efficiency
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- Kirchler, Michael, 1977 (author)
- Gothenburg University,Göteborgs universitet,Centrum för finans,Institutionen för nationalekonomi med statistik,Centre for Finance,Department of Economics
- Bonn, C. (author)
- Huber, J. (author)
- show more...
- Razen, M. (author)
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- (creator_code:org_t)
- Elsevier BV, 2015
- 2015
- English.
- In: European Economic Review. - : Elsevier BV. - 0014-2921. ; 77, s. 1-19
- Journal article (peer-reviewed)
Abstract
Subject headings
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- We investigate the impact of cash and trader inflow on price efficiency in multi-period experimental asset markets. Implementing eight treatments with 672 subjects, we find that (i) the joint inflow of cash and traders triggers strong overvaluation and massive price run-ups (inflow-effect). Remarkably, the effect occurs in almost all of the 30 markets with joint cash and trader inflow and is very robust. The effect even prevails in markets with complete and symmetric fundamental information. We further show that (ii) in treatments with the joint inflow of cash and traders, prices crash to fundamentals towards maturity of the asset. The analysis of traders' beliefs reveals that (iii) despite fundamental values staying constant, beliefs about fundamentals co-move with upwardly trending prices. Finally, we report a speculative motive only among the optimists in treatments where we observe the inflow-effect. (C) 2015 Elsevier BM. All rights reserved.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Keyword
- Experimental finance
- Inflow-effect
- Trader inflow
- Asset market
- Price efficiency
- EXPERIMENTAL ASSET MARKETS
- BUBBLES
- EXPECTATIONS
- COMPETITION
- CRASHES
- IMPACT
- Economics
Publication and Content Type
- ref (subject category)
- art (subject category)
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