The effect of earned versus house money on price bubble formation in experimental asset markets
Corgnet, Brice, Hernán-González, Roberto, Kujal, Praveen 
ORCID: https://orcid.org/0000-0002-2917-9724 and Porter, David
(2015)
The effect of earned versus house money on price bubble formation in experimental asset markets.
Review of Finance, 19
(4)
.
pp. 1455-1488.
ISSN 1573-692X
[Article]
(doi:10.1093/rof/rfu031)
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Abstract
Does house money exacerbate price bubbles? We compare house money asset market experiments with an earned money treatment where initial portfolios are constructed from a real effort task. Bubbles occur; however, trading volumes and earnings dispersion are significantly higher with house money. We investigate the role of cognitive ability in accounting for the differences in earnings distribution across treatments by using the cognitive reflection test (CRT). Low CRT subjects earned less than high CRT subjects. Low CRT subjects were net purchasers (sellers) of shares when the price was above (below) fundamental value. The opposite was true for high CRT subjects.
| Item Type: | Article |
|---|---|
| Research Areas: | A. > Business School > Economics |
| Item ID: | 13839 |
| Notes on copyright: | © The Authors 2014. Published by Oxford University Press on behalf of the European Finance Association. This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For commercial re-use, please contact journals.permissions@oup.com |
| Useful Links: | |
| Depositing User: | Praveen Kujal |
| Date Deposited: | 31 Oct 2014 15:34 |
| Last Modified: | 30 Apr 2020 20:52 |
| URI: | https://eprints.mdx.ac.uk/id/eprint/13839 |
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