Financial Bubbles: Excess Cash, Momentum, and Incomplete Information

@article{Caginalp2001FinancialBE,
  title={Financial Bubbles: Excess Cash, Momentum, and Incomplete Information},
  author={Gunduz Caginalp and David Porter and Vernon L. Smith},
  journal={Journal of Psychology and Financial Markets},
  year={2001},
  volume={2},
  pages={80 - 99}
}
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… 
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