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Speculation, money supply and price indeterminacy in financial markets: An experimental study
- Source :
- Journal of Economic Behavior & Organization. 200:1275-1296
- Publication Year :
- 2022
- Publisher :
- Elsevier BV, 2022.
-
Abstract
- To explore how speculative trading influences prices in financial markets, we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) and dividend-collecting investors. Moreover, we operate markets at two different levels of money supply. We find that in phases with only speculating investors present (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) mispricing increases with the number of transfers until maturity; and (iv) speculative trading pushes prices upward (downward) when the supply of money is high (low). These results suggest that controlling the money supply can help to stabilize asset prices.
- Subjects :
- Organizational Behavior and Human Resource Management
Economics and Econometrics
Rational expectations
050208 finance
05 social sciences
Financial market
Money supply
Monetary economics
Maturity (finance)
Experimental finance
0502 economics and business
Economics
Dividend
Asset (economics)
050207 economics
Speculation
Subjects
Details
- ISSN :
- 01672681
- Volume :
- 200
- Database :
- OpenAIRE
- Journal :
- Journal of Economic Behavior & Organization
- Accession number :
- edsair.doi...........670441d849024e37f3c57b12fa13bb0c