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Article
Bursting bubbles: Linking experimental financial market results to field market data
Journal of Behavioral Finance (2008)
  • Julia Henker, University of New South Wales
  • Sian Owen, University of New South Wales
Abstract

The laboratory, where variables can be measured and controlled, is perhaps the most efficient place to test scientific theory, yet in general empirical financial research neglects experimental finance results. We link laboratory findings to actual, or field, data, applying the Smith, Suchanek and Williams [1988] experimental market model to Australian stock exchange data. We introduce modifications that improve the model's fit to field market conditions. The experimental model is a reliable predictor of field market bubble bursts in more than 50% of the cases we test, and our modifications improve the performance to 77% of the cases. Our results suggest that experimental financial market results should be accorded more attention in empirical research.

Publication Date
March 7, 2008
Publisher Statement
Citation only

Henker, J. & Owen, S. (2008). Bursting bubbles: Linking experimental financial market results to field market data. Journal of Behavioral Finance, 9(1), 5-14

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© Copyright The Institute for Behavioral Finance, 2008

DOI: http://dx.doi.org/10.1080/15427560801896602
Citation Information
Julia Henker and Sian Owen. "Bursting bubbles: Linking experimental financial market results to field market data" Journal of Behavioral Finance Vol. 9 Iss. 1 (2008)
Available at: http://works.bepress.com/julia_henker/10/