No Bubbles in the City: An Experiment with Professional Traders
Speaker: Antonio Guarino (University College London)
Date: Sept. 11, Wednesday, 2019
Time: 11: 30 am - 12:30 pm
Venue: Room 1050, Pudong Campus
Abstract:
We present results from a laboratory experiment whose subjects are traders and portfolio managers in financial institutions in London (UK). We run a classic market experiment where subjects trade an asset with a declining fundamental value. A robust result of previous, similar experiments with student subjects is overpricing (“bubbles”), which we also replicate in our control treatment with undergraduate student subjects. In contrast, we find that professional traders trade at prices that closely reflect the declining fundamental value of the asset. Our results suggest that the bubbles observed in the laboratory do not apply to markets entirely composed by professional traders.
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