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on Corporate Finance |
| By: | Francesco Menoncin; Paolo Panteghini; Luca Regis |
| Abstract: | We model a risk-averse firm owner who wants to maximize the intertemporal expected utility of firm’s dividends. The optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA) of the _rm. According to the empirical evi-dence, we let profitability follow a mean reverting process. The problem is solved in a quasi-explicit form by computing both the optimal dividend and the optimal debt. Finally, we calibrate the model to actual US data and check both the properties of the solution and its sensitivity to the model parameters. In particular, our results show that the optimal dividend is smooth over time and that leverage is predominantly constant over time. Neither asymmetric information nor frictions are necessary to obtain these findings. |
| Keywords: | dividend policy, capital structure, profit mean-reversion, closed-form, stochastic optimization |
| JEL: | H25 G32 G35 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9407&r= |
| By: | Feng, Bing; Sun, Kaiyang; Zhong, Ziqi; Chen, Min |
| Abstract: | In order to explore the internal connection between information sharing and investment performance in the venture capital network community, this study took environmental-governance start-ups as the research object and used the 2009–2020 environmental-social enterprise start-up venture capital investment events as a data sample. The successful exit rate of the venture capital portfolio and the successful listing rate of investment ventures were used as the measurement cri-teria. Combined with regression analysis, the relationship between information sharing and investment performance in the venture capital network community was analyzed in detail. Research shows that there are differences between the ways of information sharing in the venture capital network communities. In the regression results, all coefficients are less than 0.01. There is a positive correlation between information sharing and investment performance in the venture capital network community. With the increase in enterprise characteristic variables, the degree of enterprise risk information sharing is getting higher and higher. This ultimately leads to more and more frequent corporate investment performance and a higher possibility of acquisition. Among them, the degree of information sharing in the venture capital network community is relatively high, and venture capital companies that are supported by corporate venture capital institutions will benefit even more from listed capital. Not only was the analysis of the relationship between finance and investment in the venture capital network community pointed out in this research, but also the investment development of entrepreneurial enterprises was also provided with feasible sugges-tions. |
| Keywords: | capital grid; environ-mental-social enterprises; information sharing; Investment performance; venture capital |
| JEL: | F3 G3 R14 J01 |
| Date: | 2021–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112731&r= |
| By: | Hearn, Bruce (University of Bradford, Bradford, United Kingdom); Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Randøy, Trond (Copenhagen Business School, Copenhagen, Denmark and) |
| Abstract: | Ceding ownership to outside investors provides a control dilemma for founders. In less developed capital markets with weaker formal institutions, we argue that retained founder director ownership can lower the transaction costs of external capital. Our argument rests on incomplete contracting and institutional theory, particularly highlighting the elevated status of the founding entrepreneur. Based on a longitudinal study of 179 listed Caribbean firms, we find that retained founder ownership reduces information asymmetry vis-à-vis outside minority investors. The reduced information asymmetry is even stronger for firms with a related party/subsidiary within a tax haven, and for firms with strong shareholder rights. |
| Keywords: | Founders; Ownership; Bid Ask Spreads; Institutions; Caribbean |
| JEL: | D53 F23 G12 G15 G32 G34 |
| Date: | 2021–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1419&r= |
| By: | Panagiotis Karavitis; Pantelis Kazakis; Tianyue Xu |
| Abstract: | CEO overconfidence is a significant factor in corporate decisions. We investigate whether CEO overconfidence affects the relationship between corporate social responsibility (CSR) and tax avoidance using a dataset of Chinese listed companies. We find that firms with higher CSR scores avoid paying more taxes. This relationship is moderated, however, by CEO overconfidence. While firms with higher CSR scores avoid more taxes on average, those led by overconfident CEOs avoid less. We contend that overconfident CEOs are less likely to use CSR strategically to mitigate risk. Our conclusion stands up to a battery of sensitivity tests, including the use of CSR subdimensions. |
| Keywords: | Corporate social responsibility; Tax avoidance; CEO overconfidence |
| JEL: | G30 H26 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2021_18&r= |
| By: | Iván Arribas (IVIE, ERI-CES and Department of Economic Analysis, Universitat de València, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain); TingTing Zhu (Leicester Castle Business School, DeMontfort University, UK) |
| Abstract: | We revisit the determinants of capital structure for European SMEs. Our work differs from previous contributions in the field by considering several measures of leverage (short-term debt, long-term debt, and total debt) and employing panel Bayesian model averaging, in an effort to address regression model uncertainty. Examining a rich set of firm-specific, country-specific, and institutional determinants of capital structure in 15 European Union countries over the period 2002–2019, we find that the effects of the different variables considered on leverage are intricate. First, only certain variables are important in explaining capital structure, based on their high posterior inclusion probabilities (above 0.5). Second, the effect of some variables differs depending on the measure of leverage considered. Under Bayesian model averaging, results are based on all possible models, rather than a particular one, and give a much greater depth of information. Therefore, our methods help to provide some additional guidance on the existing competing theories (trade-off, pecking-order, agency), which seems appropriate as empirical studies to date have not been conclusive. Our findings are especially pertinent in the European context where the predominance of SMEs, which are vulnerable to economic downturns, makes it particularly relevant to understand what determines their capital structure. |
| Keywords: | Bayesian model averaging, capital structure, European Union, SMEs |
| JEL: | G32 G33 D21 D22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2021/11&r= |
| By: | Berk, Jonathan B. (Stanford University and NBER); van Binsbergen, Jules H. (University of Pennsylvania and NBER) |
| Abstract: | We evaluate the quantitative impact of ESG divestitures. For divestitures to have impact they must change the cost of capital of affected firms. We derive a simple expression for the change in the cost of capital as a function of three inputs: (1) the fraction of socially conscious capital, (2) the fraction of targeted firms in the economy and (3) the correlation between the targeted firms and the rest of the stock market. Given the current state of ESG investment we find that the impact on the cost of capital is too small to meaningfully affect real investment decisions. We empirically corroborate these small estimates by studying firm changes in ESG status. When firms are either included or excluded from the leading socially conscious US index (FTSE USA 4Good) we find no detectable effect on the cost of capital. We conclude that current ESG divesture strategies have had little impact and will likely have little impact in the future. Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3981&r= |
| By: | Sébastien Pouget (University of Toulouse Capitole, Toulouse School of Economics and Toulouse School of Management); Christian Gollier (University of Toulouse Capitole, Toulouse School of Economics) |
| Abstract: | Socially responsible investors constitute an important force in today's global financial markets. This paper examines conditions under which socially responsible investors induce companies to behave responsibly. We develop an asset pricing model in which some shareholders are active owners, i.e., they engage companies by voting on strategic decisions. Differences of objective among shareholders arise because socially responsible investors value corporate externalities. In our baseline model, we show that a firm may choose a responsible strategy, even if the majority of investors are not responsible. We also demonstrate that such choice of a responsible strategy might be fragile because it might depend on investors' self-fulfilling beliefs. We then extend our baseline model to analyse the link between divestment and engagement strategies, the case with multiple firms, the role of benefit corporation charters and the impact of a large investor. |
| Keywords: | asset pricing, voting, corporate social responsibility, responsible investments, externalities, , |
| JEL: | G11 G34 H23 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2021.15&r= |
| By: | Coakley, Jerry; Cumming, Douglas J.; Lazos, Aristogenis; Vismara, Silvio |
| Abstract: | The nominee approach to equity crowdfunding pools all crowd investors into one (nominee) account where typically the platform acts as the legal owner but the crowd retains beneficial ownership. The platform plays an active digital corporate governance role that simultaneously enfranchises crowd investors with voting and ownership rights but removes the administrative burden on startups of having to deal with several hundred shareholders. Through an inter-platform and intra-platform analysis of a large sample of 1,018 initial equity crowdfunding campaigns, this paper assesses both the short-term and the long-term impact of nominee versus direct ownership. It finds that nominee initial campaigns are on average more successful than direct ownership campaigns in that they are more likely to succeed, raise more funds, attract overfunding and enjoy greater long run success in terms of successful seasoned equity crowdfunded offerings, numbers of such offerings, and probability of survival. These results hold inter-platform between the two main UK equity crowdfunding platforms (Seedrs and Crowdcube) as well as intra-platform, using the post-2015 quasi-natural experiment when the nominee approach became an option for startups raising capital on Crowdcube. |
| Keywords: | Entrepreneurial finance,corporate governance,nominee account |
| JEL: | G24 M13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:664&r= |
| By: | Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter |
| Abstract: | This working paper provides you with an overview of the main markets relevant to the EIF. It starts by discussing the general market environment, then looks at the markets for SME equity and debt products. In addition, it focusses on a number of thematic policy areas of interest to the EIF, such as Inclusive Finance, Fintech and Green finance & investment. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202175&r= |
| By: | Mattia Guerini (SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa], OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Lionel Nesta (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Xavier Ragot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Stefano Schiavo (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po) |
| Abstract: | We simulate the impact of the Covid-19 crisis on corporate solvency using a sample of around one million French nonfinancial companies, assuming they minimize their production costs in the context of a sharp drop in demand. We find that the lockdown triggers an unprecedented increase in the share of illiquid and insolvent firms, with the former more than doubling relative to a No-Covid scenario (growing from 3.8% to more than 10%) and insolvencies increasing by 80% (from 1.8% to 3.2%). The crisis has a heterogeneous effect across sectors, firm size, and region. Sectors such as hotels and restaurants, household services, and construction are the most vulnerable, while wholesale and retail trade, and manufacturing are more resilient. Micro-firms and large businesses are more likely to face solvency issues, whereas SMEs and medium-large firms display lower insolvency rates. The furlough scheme put forward by the government (activité partielle) has been very effective in limiting the number of insolvencies, reducing it by more than 1 percentage point (approximately 12,000 firms in our sample). This crisis will also have an impact on the overall efficiency of the French economic system, as market selection appears to be less efficient during crisis periods relative to "normal times": in fact, the fraction of very productive firms that are insolvent significantly increases in the aftermath of the lockdown. This provides a rationale for policy interventions aimed at supporting efficient, viable, yet illiquid firms weathering the storm. We evaluate the cost of such a scheme aimed at strength-ening firms' financial health to around 8 billion euros. |
| Keywords: | Firm liquidity,Solvency,Covid-19 lockdown |
| Date: | 2020–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03403022&r= |
| By: | Ilyas El Ghordaf (Université Mohamed 1 Oujda MAROC); Abdelbari El Khamlichi (UCD - Université Chouaib Doukkali, IAE - UCA - Institut d'Administration des Entreprises - Clermont-Auvergne - UCA - Université Clermont Auvergne) |
| Abstract: | There is an important literature focused on profit warnings and its impact on stock returns. We provide evidence from Moroccan stock market which aims to become an African financial hub. Despite this practical improvement, academic researches that focused on this market are scarce and our study is a first investigation in this context. Using the event study methodology and a sample of companies listed in Casablanca Stock Exchange for the period of 2009 to 2016, we examined whether the effect of qualitative warning is more negative compared to quantitative warnings in a short event window. Our empirical findings show that the average abnormal return on the date of announcement is negative and statistically significant. The magnitude of this negative abnormal return is greater for qualitative warnings than quantitative ones. |
| Keywords: | Profit warnings,event study,returns,disclosure,Morocco,stock exchange JEL Classifications: G14 |
| Date: | 2021–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03420284&r= |
| By: | Torfs, Wouter |
| Abstract: | This working paper elaborates on the most recent update of the EIF SME Access to Finance (ESAF) Index, a composite indicator used to monitor the state of SME external financing markets in the 27 EU countries. The current update, using the latest available data, constitutes the eight iteration of this exercise. The paper provides some background information underlying the ESAF results for 2020, which are the latest available data at the time of writing. The results capture the initial impact of COVID-19 crisis and the subsequent policy response. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202176&r= |
| By: | Gianni La Cava (Reserve Bank of Australia) |
| Abstract: | Economists have long been interested in the effect of business sentiment on economic activity. Using text analysis, I construct a new company-level indicator of sentiment based on the net balance of positive and negative words in Australian company disclosures. I find that company-level investment is very sensitive to changes in this corporate sentiment indicator, even controlling for fundamentals, such as Tobin's Q and expected profits, as well as controlling for measures of company-level uncertainty. I explore the mechanisms that link investment to sentiment. The conditional relationship could be because sentiment proxies for private information held by managers about the future prospects of the company or because of animal spirits among managers relative to investors. I find that the effect of sentiment on investment is relatively persistent, which is consistent with the private information story, albeit less persistent than other news shocks, such as Tobin's Q. But the effect of sentiment on investment is not any stronger at 'opaque' companies in which managers are likely to be better informed than investors, which argues against the private information story. Corporate investment has been weak in Australia since the global financial crisis (GFC) and demand-side factors, such as lower sales growth, explain more than half of this persistent weakness. Low sentiment and heightened uncertainty weighed on investment during the GFC but have been less important factors since then. |
| Keywords: | investment; sentiment; text analysis; animal spirits; business cycle |
| JEL: | D22 D25 D84 D91 E22 E71 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2021-11&r= |
| By: | Nicolas Soenen; Rudi Vander Vennet (-) |
| Abstract: | Using bank CDS spreads, we examine three types of determinants of Euro Area bank default risk in the period 2008-2019: bank characteristics related to new regulation, the bank-sovereign nexus and the monetary policy stance. We find that Basel 3 regulation improves the banks’ risk profile since higher capital ratios and more stable deposit funding contribute significantly to lower CDS spreads. We confirm the persistence of the bank-sovereign interconnectedness and find that sovereign default risk is transmitted to bank risk with an amplification factor. The ECB monetary policy stance is neutral with respect to bank risk, hence we find no evidence of perceived excessive risk-taking behavior. |
| Keywords: | bank default risk, CDS spreads, monetary policy, sovereign risk |
| JEL: | G21 G32 E52 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:21/1033&r= |
| By: | Neely, Megan Tobias; Carmichael, Donna |
| Abstract: | A once-in-a-century pandemic has sparked an unprecedented health and economic crisis. Less examined is how predatory financial investors have shaped the crisis and profited from it. We examine how U.S. shadow banks, such as private equity, venture capital, and hedge fund firms, have affected hardship and inequality during the crisis. First, we identify how these investors helped to hollow out the health care industry and disenfranchise the low-wage service sector, putting frontline workers at risk. We then outline how, as the downturn unfolds, shadow banks are shifting their investments in ways that profit on the misfortunes of frontline workers, vulnerable populations, and distressed industries. After the pandemic subsides and governments withdraw stimulus support, employment will likely remain insecure, many renters will face evictions, and entire economic sectors will need to rebuild. Shadow banks are planning accordingly to profit from the fallout of the crisis. We argue that this case reveals how financial investors accumulate capital through private and speculative investments that exploit vulnerabilities in the economic system during a time of crisis. To conclude, we consider the prospects for change and inequality over time. |
| Keywords: | Covid-19; crisis; financial services; financialization; inequality; neoliberalism; shadow banking; coronavirus |
| JEL: | F3 G3 |
| Date: | 2021–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112697&r= |
| By: | Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka |
| Abstract: | Worldwide, the overwhelming majority of large horizontal mergers are cleared by antitrust authorities unconditionally. The presumption seems to be that efficiencies from these mergers are sizeable. We calculate the compensating efficiencies that would prevent a merger from harming consumers for 1,014 mergers affecting 12,325 antitrust markets scrutinized by the European Commission between 1990 and 2018. Compensating efficiencies seem too large to be achievable for many mergers. Barriers to entry and the number of firms active in the market are the most important factors determining their size. We highlight concerns about the Commission’s merger enforcement being too lax. |
| Keywords: | compensating efficiencies, efficiency gains, merger control, concentration, screens, HHI, mergers, unilateral effects, market definition, entry barriers |
| JEL: | L19 L24 L00 K21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9403&r= |
| By: | Marco Cipriani; Antonio Guarino; Andreas Uthemann |
| Abstract: | We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on financial market outcomes. In our sequential trading model, there are price-elastic noise and informed traders. We estimate the model through maximum likelihood for a sample of sixty New York Stock Exchange (NYSE) stocks in 2017. We quantify the effect of introducing an FTT given the parameter estimates. An FTT increases the proportion of informed trading, improves information aggregation, but lowers trading volume and welfare. For some less-liquid stocks, however, an FTT blocks private information aggregation. |
| Keywords: | financial transaction tax; market microstructure; structural estimation |
| JEL: | G14 D82 C13 |
| Date: | 2021–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:93431&r= |
| By: | E. Mark Curtis; Daniel G. Garrett; Eric C. Ohrn; Kevin A. Roberts; Juan Carlos Suárez Serrato |
| Abstract: | We study how tax policies that lower the cost of capital impact investment and labor demand. Difference-in-differences estimates using confidential US Census Data on manufacturing establishments show that tax policies increased both investment and employment, but did not lead to wage or productivity gains. Using a structural model, we show that the primary effect of the policy was to increase the use of all inputs by lowering overall costs of production. The policy further stimulated production employment due to the complementarity of production labor and capital. Supporting this conclusion, we find that investment is greater in plants with lower labor costs. Our results show that recent tax policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines. |
| JEL: | D22 H25 H32 J23 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29485&r= |
| By: | Nathanael Ojong (York University, Toronto, Canada); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This chapter examines how the Covid-19 pandemic has affected financial development and financial inclusion in African countries. The study provides both broad perspectives and country-specific frameworks based on selected country cases studies. Some emphasis is placed on the achievement of sustainable development goals (SDGs) that are related to financial inclusion. The study aims to understand what immediate challenges the COVID-19 pandemic has represented to the economies and societies on the one hand and on the other, the effect of the COVID-19 on the interconnected financial systems in terms of consequences of the pandemic. The relevance of the study builds on the importance of these insights in helping both scholars and policy makers understand how the effect of the pandemic on the financial system and by extension, the global economy can be mitigated for more financial inclusion. |
| Keywords: | Covid-19 pandemic; financial development; Financial inclusion; Africa |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/078&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Valentine B. Soumtang (University of Yaoundé II, Cameroon); Ofeh M. Edoh (Yaoundé, Cameroon) |
| Abstract: | This study assesses financial determinants of informal financial sector development in 48 Sub-Saharan African countries for the period 1995-2017. Quantile regressions are used as the empirical strategy which enables the study to assess the determinants throughout the conditional distribution of informal sector development dynamics. The following financial determinants affect informal financial development and financial informalization differently in terms of magnitude and sign: bank overhead costs; net internet margin; bank concentration; return on equity; bank cost to income ratio; financial stability; loans from non-resident banks; offshore bank deposits and remittances. The determinants are presented from a plethora of perspectives, inter alia: U-Shape, S-Shape and positive or negative thresholds. The study not only provides a practical way by which to assess the incidence of financial determinants on informal financial sector development, but also provides financial instruments by which informal financial development can be curbed. |
| Keywords: | Informal finance; financial development; Africa |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/077&r= |
| By: | Hodaka Morita; Kumpei Akiyama; Tomohiro Ara; Shosuke Noguchi; Arghya Ghosh |
| Abstract: | Partial equity ownership (PEO) between horizontally competing firms may have negative impacts on the society by increasing firms' market power and weakening their competition. At the same time, PEO may also have positive impacts on the society by inducing knowledge transfer between competing firms and shifting outputs from a cost ineffective firm to a cost effective firm. As oligopoly models that explores the trade-off of these positive and negative impacts, we discuss the model of Ghosh and Morita (2017) that focuses on the link between PEO and knowledge transfer, and the model of Ara, Ghosh and Morita (2021) that focuses on the shift of outputs in international contexts, clarifying the process through which the level of PEO is endogenously determined in these models. We also discuss Akiyama's (2021) model of joint venture (JV) in which two horizontally competing firms can establish a JV, exploring the process through which the ratio of JV's equity ownership is endogenously determined. We discuss policy implications of these models. |
| Date: | 2021–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:toh:tupdaa:10&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Mushfiqur Rahman (London, UK); Okeoma J-P Okeke (London, UK); Afzal S. Munna (London, UK) |
| Abstract: | The study provides insights into how tourism can be managed to improve financial access in sub-Saharan Africa. The empirical evidence is based on the generalised method of moments. To make this assessment, inequality dynamics (i.e. the Gini coefficient, the Atkinson index and Palma ratio) are interacted with tourism (tourism receipts and tourists’ arrivals) to establish inequality levels that should not be exceeded in order for tourism to promote financial access in the sampled countries. From the findings, inequality levels that should not be exceeded for tourism to promote financial access are provided: (i) 0.666 of the Atkinson index and 5.000 of the Palma ratio for tourism receipts to promote financial access and (ii) for tourist arrivals to enhance financial access, 0.586, 0.721 and 6.597 respectively, of the Gini coefficient, the Atkinson index, and the Palma ratio. Policy implications are discussed. |
| Keywords: | Tourism; Management; Financial access; Inequality; Africa; Sustainable Development |
| JEL: | O10 O40 Z3 Z32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/079&r= |
| By: | Kyle Hampton (Department of Economics, University of Alaska Anchorage); Paul Johnson (Department of Economics, University of Alaska Anchorage) |
| Abstract: | The authors present Kaivik, a free online asset auction classroom experiment platform that works with cellphones. Students use cellphones to trade units of a financial asset (shares in a single company) by submitting bid and ask prices plus the number of asset units they are offering to buy or sell per transaction. In this “order book†system the liquidity of the asset market at any point in time is variable. Trading can generate asset market bubbles. Instructors set key experiment parameters. Results are recorded and can be presented on a screen for discussion. Students are given an experiment report template to complete. |
| Keywords: | Economic Education and Teaching of Economics, Portfolio Choice, Investment Decisions, Financial Bubbles, Asset Markets, Information and Market Efficiency |
| JEL: | A2 G22 G17 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2021-04&r= |