Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203277 
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper No. 54
Version Description: 
10th February 2015
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
We investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets. We show that setting a visual anchor at the fundamental value (FV) in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets. If no FV-anchor is set, bubble-crash patterns emerge. Our results indicate that bubbles in laboratory environments are primarily sparked in the first period. If prices are initiated around the FV, they stay close to the FV over the entire trading horizon. Our insights can be related to initial public offerings and the interaction between prices set on pre-opening markets and subsequent intra-day price dynamics.
Subjects: 
Experimental Asset Markets
Anchoring
Bubbles
JEL: 
C90
C91
D03
G02
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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