Financial Bubbles: Excess Cash, Momentum, and Incomplete Information

  title={Financial Bubbles: Excess Cash, Momentum, and Incomplete Information},
  author={G. Caginalp and D. Porter and V. Smith},
  journal={Journal of Psychology and Financial Markets},
  pages={80 - 99}
  • G. Caginalp, D. Porter, V. Smith
  • Published 2001
  • Economics
  • Journal of Psychology and Financial Markets
  • We report on a large number of laboratory market experiments demonstrating that a market bubble can be reduced under the following conditions: 1) a low initial liquidity level, i.e., less total cash than value of total shares, 2) deferred dividends, and 3) a bid-ask book that is open to traders. Conversely, a large bubble arises when the opposite conditions exist. The first part of the article is comprised of twenty-five experiments with varying levels of total cash endowment per share… CONTINUE READING
    166 Citations
    Accounting Standards and Financial Market Stability: An Experimental Examination
    • 1
    • Highly Influenced
    • PDF
    Bubbles in Experimental Asset Markets
    • 1
    • PDF
    The dynamics of trader motivations in asset bubbles
    • G. Caginalpa, V. Ilievab
    • 2005
    • 17
    • PDF


    Initial Cash/Asset Ratio and Asset Prices: An Experimental Study
    • 133
    • PDF
    Stock Market Bubbles in the Laboratory
    • 97
    • PDF
    Asset flow and momentum: deterministic and stochastic equations
    • G. Caginalp, D. Balenovich
    • Mathematics
    • Philosophical Transactions of the Royal Society of London. Series A: Mathematical, Physical and Engineering Sciences
    • 1999
    • 67
    • PDF
    Investor Overreaction: Evidence That Its Basis Is Psychological
    • 61
    • PDF
    Stabilization, Syndication, and Pricing of IPOs
    • 168