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Asset market bubbles in an experiment with sequential information releases

Brian D. Kluger (Lindner College of Business, University of Cincinnati, Cincinnati, Ohio, USA)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 29 June 2021

Issue publication date: 24 November 2022




Much of the author’s understanding of experimental asset market bubbles is based on the Smith, Suchanek and Williams (SSW) design. The purpose of this paper is to find alternative bubble-producing designs, which is a promising path for new insights.


The Smith et al. (1988) experimental design has been widely used to study bubbles. This paper introduces a novel modification, where the asset has a binary liquidation value and no dividends. Dividends are replaced by the events affecting the liquidation value probability distribution.


Overpricing is common and consistent with subject optimism concerning the random liquidation value. Bubbles are also observed, as the degree of overpricing often rises and then fall during the experiments. However, crashes where the asset price drops below fundamental values are not observed.

Research limitations/implications

Subject over optimism, speculation and/or subject confusion are possible bubble ingredients. More research is needed to determine how much the factors responsible for these bubbles differ from the factors responsible for the SSW design. However, it seems likely that there are at least some common factors given the structural similarities between the two designs.


The present design is novel and may provide a means to better generalize results from previous experiments based on the SSW design.



The author appreciates helpful comments from the anonymous reviewer and from Lucy Ackert, David Munro, Li Qi and Lijia Wei, as well as financial support from the Lindner College of Business at University of Cincinnati.


Kluger, B.D. (2022), "Asset market bubbles in an experiment with sequential information releases", Review of Behavioral Finance, Vol. 14 No. 5, pp. 772-790.



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