Futures markets and bubble formation in experimental asset markets

Charles Noussair, Steven Tucker

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

Abstract

We construct asset markets of the type studied in Smith et al. (1988) in which price bubbles and crashes are widely observed. In addition to a spot market, there are futures markets in operation, one maturing at the beginning of each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and the decision errors that appear to give rise to price bubbles in experimental asset markets.

Original languageEnglish (US)
Pages (from-to)167-184
Number of pages18
JournalPacific Economic Review
Volume11
Issue number2
DOIs
StatePublished - Jun 2006
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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