The effect of earned versus house money on price bubble formation in experimental asset markets

Corgnet, Brice, Hernán-González, Roberto, Kujal, Praveen ORCID logoORCID: 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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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 (, 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
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Depositing User: Praveen Kujal
Date Deposited: 31 Oct 2014 15:34
Last Modified: 29 Nov 2022 22:40

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