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Futures Markets And Bubble Formation In Experimental Asset Markets

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  • Charles Noussair
  • Steven Tucker

Abstract

. We construct asset markets of the type studied in Smith et al. (1988), in which price bubbles and crashes are widely observed. In addition to a spot market, there are futures markets in operation, one maturing at the beginning of each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and the decision errors that appear to give rise to price bubbles in experimental asset markets.

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  • Charles Noussair & Steven Tucker, 2006. "Futures Markets And Bubble Formation In Experimental Asset Markets," Pacific Economic Review, Wiley Blackwell, vol. 11(2), pages 167-184, June.
    • Handle: RePEc:bla:pacecr:v:11:y:2006:i:2:p:167-184
    DOI: 10.1111/j.1468-0106.2006.00308.x
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    References listed on IDEAS

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    1. Shinichi Hirota & Shyam Sunder, 2002. "Stock Market as a 'Beauty Contest': Investor Beliefs and Price Bubbles sans Dividend Anchors," Yale School of Management Working Papers ysm2, Yale School of Management.
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