Behavioral Finance: Experimental Market Assets
Provide a 550 or more-word summary (formatted according to APA guidelines) of the new research in this area from a minimum of five new peer reviewed journal articles written the last 3 years and identify questions that need exploring in future research.
Your discussion should be organized in a three-paragraph format:
Introductory Paragraph: gives an overview and definition of the Experimental Markets Assets. At the end of the paragraph it gives an idea of how your forum is organized.
Current Trends Paragraph: In this paragraph, you will discuss the themes that you found in the research from the 5 articles related to your topic. This paragraph should be a synthesis of the research and not just a listing of annotated summaries.
Future Research Paragraph: In this paragraph, you will discuss areas of future research by referencing the 5 articles that you identified. The future research areas should be based on the findings of the authors of those articles rather than general ideas you may have.
*A reference section should then be included at the end of your discussion.
ANSWER
Behavioral Finance: Experimental Market Assets
Introduction
In an experimental market asset, time posit as the main feature that imposes the fundamental value. The practitioners of experimental market asset revolve on the construct that that the fundamental value of the asset is bound to change over time due to the variation of the factors influencing the performance of the asset. The market is subject to shocks, inflation, price changes, competition, market demand and supply, among other factors. This presents varying market changes that are determined by the availability and access to new information on the market and the asset. The availability and access of new information enable the decision making through informed context and clear understanding of the performance of the asset market. To determine the intrinsic value of the asset market, the capacity to maintain the original value with continuous growth and development – is influenced by continuous increase in value and significance of the asset. Therefore, as a new frontier – the essay examines the current trends of the experimental market asset and proposes key areas vital to the future research.
Current Trends
The functionality of financial markets is in constant change and varying. Füllbrunn and Neugebauer (2020) emphasizes on the importance of the regulation of the margin requirements as a way to control the risks of the leveraged positions in the financial markets. The capacity to actively regulate the margin determines the performance asset market (Füllbrunn & Neugebauer, 2020). The asset market performance takes control of the trading mechanisms impacting on the regulation and management of the performance of the pricing strategies and approaches. Taking into account the operations of the bubble asset market experiments, Hommes, Kopányi-Peuker and Sonnemans (2021) posit the value of information regulation and control. The market performance and operations is determined by the influence of information on the pricing of the assets in the market. The bubble formation and crashes determine the market performance and its overall impact on the market in the long-run which helps regulating the fundamental value into a constant figure (Huber, Bindra & Kleinlercher, 2019). Somette et al., (2020) asserts that the capacity to curb overpricing persistence in experimental asset market is integral is vital to minimize the intrinsic uncertainties. This is vital to taking control of the market performance through control prices of the asset markets. Marquardt, Moussair and Weber (2019) assert the significance of maintaining rational expectations in an experimental asset market primarily based on the regulation of the shocks experienced in the market.
Future Research
The main point of focus on the experimental asset markets should be focused on the capacity to improve the regulation of the market to deescalate the effects of the shocks on fundamental value. The capacity to regulate the performance of the market is vital to take control of the pricing and impact of the shocks on the assets. The asset market must continuously be furnished with sufficient information that help positively regulate the pricing of the asset markets. The financial decisions in experimental asset markets help individuals to control how their financials are subjected to shocks and variations in pricing. Future research should take into account the role of information in regulating prices and shocks on the assets. The research should take into account how respective individuals’ decisions impact on the performance of the overall asset market.
References
Füllbrunn, S., & Neugebauer, T. (2020). Testing market regulations in experimental asset markets–The case of margin purchases. Journal of Economic Behavior & Organization.
Hommes, C., Kopányi-Peuker, A., & Sonnemans, J. (2021). Bubbles, crashes and information contagion in large-group asset market experiments. Experimental Economics, 24(2), 414-433.
Huber, C., Bindra, P. C., & Kleinlercher, D. (2019). Design-features of bubble-prone experimental asset markets with a constant FV. Journal of the Economic Science Association, 5(2), 197-209.
Marquardt, P., Noussair, C. N., & Weber, M. (2019). Rational expectations in an experimental asset market with shocks to market trends. European Economic Review, 114, 116-140.
Sornette, D., Andraszewicz, S., Wu, K., Murphy, R. O., Rindler, P., & Sanadgol, D. (2020). Overpricing persistence in experimental asset markets with intrinsic uncertainty. Economics, 14(1).
