【Behavioral and Experimental Economics Seminar】Asset Allocation and Price Bubble: An Experimental Economics Study

Behavioral and Experimental Economics Seminar (Session 2)

[Time] September 11th, 2018 (Tuesday) 12:00-13:30
[Location] Room 734, Mingde Main Building, 
[Topic] Asset Allocation and Price Bubble: An Experimental Economics Study
[President] Wei Lijia (Professor, School of Economics and Management, Wuhan University) [Moderator] Lu Fangwen (Professor, School of Economics, Renmin University of China)

[Abstract] This paper uses the method of experimental economics to explore the bubble problem of physical assets. In the experimental setting of this paper, participants need to repeat the purchase of physical assets and make production decisions. The basic value of physical assets remains unchanged during the experiment. Experiments designed with reference to Holt et al (2017) paper on the risk of asset price bubbles and Holt and Shobe (2016) paper on carbon emissions markets. Our innovations in previous papers are: (1) constructing the setting of constant or tight asset supply; (2) constructing the setting of the basic value of assets; (3) physical assets and financial assets constructed in experimental design. There are different attributes. We find that when the supply of physical assets is constant, the price will generate a bubble, but the bubble will soon burst; when the supply of physical assets is gradually reduced, the participants cannot rationally use the intertemporal smoothing, and the asset price is slow. Rise to a skyrocketing phenomenon. Based on the expected data of participants’ price collection in the experiment, this paper finds that the difference between expected and actual prices drives the rise and fall of asset prices. The paper also finds that if the participants are allowed to borrow the physical assets over time, it will help to stabilize the price bubble of the assets.

[Introduction to the keynote speaker] Lijia Wei is a professor at the School of Economics and Management of Wuhan University, director of the Department of Mathematical Economics and Mathematical Finance, and a professor of young scholars and leading talents. He is also a special expert in the Guangdong Provincial Public Resource Trading Advisory Committee. His research interests are behavioral and experimental economics, and applied econometrics. The papers are published in international SSCI academic journals such as Marketing Science, Econometric Theory, Journal of Regional Science, Economic Modeling, and Pacific Economic Review, as well as “Economics (Quarterly)”, “China Industrial Economy”, “System Engineering Theory and Practice”, etc. Authoritative academic journal. He has presided over several scientific research projects such as the National Natural Science Foundation and the Humanities and Social Sciences Project of the Ministry of Education.