EXPERIMENTAL ASSET MARKETS AND MODELING

 

            Research work involves designing new experiments to understand the factors that magnify and reduce financial bubbles. This work has been in collaboration with V. Smith, D. Porter and V. Ilieva.   Our previous experiments have shown that excess cash in the system and momentum due to initial undervaluation both result in larger bubbles.  Another factor that inflates bubbles is the absence of an open book.  If trader can see the full array of bids and asks, then it becomes evident at an earlier stage that the bids are thinning out even though prices continue upward.

 

*Related Papers are Initial Cash/Asset Ratio and Stock Prices: An Experimental Study  and Financial Bubbles: Excess Cash, Momentum, and Incomplete Information       We model these phenomena using systems of differential equations and time series (statistical) methods.

 

            Recent work has involved asset markets with two different assets (eg speculative or value) in an effort to understand the influence of speculative stocks on value stocks.

 

*A Related Paper is Do Speculative Stocks Lower Prices and Increase Volatility of Value Stocks?

 

*To view “Related Papers” press CTRL + click, or go back to publications.