Price discovery in experimental asset markets　with non-monotonic fundamentals

摘要

Purpose - This paper aims to study how the trajectory of fundamental values affects price discoveryrnin an experimental asset market.rnDesign/methodology/approach - An experiment is conducted with two treatments, in which therntime path of fundamentals differs between treatments. In the peak treatment, fundamentals first risernand then fall, while in the valley treatment fundamentals first fall and then recover. The experimentrnallows market prices to be compared to fundamental values.rnFindings - Both peak and valley treatments experience bubbles when traders are inexperienced.rnHowever, price discovery is more rapid and complete in the peak than in the valley treatment. In thernpeak treatment, prices track the value, the direction of the trend, and changes in trend, more closelyrnthan in the valley treatment.rnOriginality/value - This paper documents the first experimental results regarding pricing behaviorrnin markets with non-monotonic fundamentals. It creates an environment (the valley treatment) inrnwhich convergence to close to fundamentals does not occur even with repetition of the market underrnidentical conditions. The results demonstrate that the likelihood that an asset market tracksrnfundamentals depends on the time path of fundamentals.