An analysis on the mechanism of bubble in security markets

2016 Fiscal Year Final Research Report

• Project/Area Number: 25380402
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Money/ Finance
• Research Institution: Aoyama Gakuin University
• Principal Investigator: NAKASATO Munenori 青山学院大学, 国際マネジメント研究科, 教授 (90207754)
• Research Collaborator: KITAMURA Tomoki ニッセイ基礎研究所, 主任研究員
• Project Period (FY): 2013-04-01 – 2017-03-31
• Keywords: 証券価格 / バブル / 情報の非対称性 / インフォメーションミラージュ / 実験経済学

Outline of Final Research Achievements

This research explores stock bubble in an asymmetric information environment. We consider two uncertainties, uncertainty of the asset value and the existence of informed traders. Our model has three types of market participants: a market maker, informed traders, and noise traders. The market maker updates his asset value belief through transactions. There are two types of markets, one with informed traders and one without. The market maker does not know which the market is. The market maker also updates his belief about the existence of informed traders through transactions. We find that when informed traders actually do not exist, the asset price systematically deviates from its fair value causing asset bubble. However, after the market maker sufficiently updates his belief, he adequately finds the non-existence of informed traders. Our model contributes alternative explanation about stock bubble process. We also confirm this process using numerical simulations and experiments.

Free Research Field

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