Volume 3, Number 2, 2003 Abstracts
© Copyright Erlbaum 2002

Does the Market Have a Mind of Its Own, and Does It Get Carried Away With Excess Cash?
Gunduz Caginalp-University of Pittsburgh

Bubble, Rubble, Finance in Trouble?
Andrew W. Lo-Massachusetts Institute of Technology

The Irrationality of Markets
Robert Shiller-Yale University

Individual Decision Making and Group Decision Processes
John Payne-Duke University
Arnold Wood-Martingale Asset Management

Risk Perception, Risk Communication, Risk Taking
Baruch Fischhoff-Carnegie Mellon University

Thought Contagions in Deflating and Inflating Phases of the Bubble
Aaron Lynch

Do Speculative Stocks Lower Prices and Increase Volatility of Value Stocks?
Gunduz Caginalp-University of Pittsburgh
Vladimira Ilieva-University of Arizona
David Porter-George Mason University
Vernon Smith-George Mason University

The influence of speculative stocks on value stocks is examined through a set of economics experiments. The speculative asset is designed to model a company involved in a rapidly growing market that will be saturated at some unknown point. Using a control experiment where both assets are similar value stocks, we find statistical support for the assertion that the presence of a speculative stock increases the volatility and diminishes the price of the value stock. In addition, the temporal minimum price of the value stock during the last phase of the experiment is lower in the presence of the speculative stock (when the trading price of the speculative asset is declining sharply). These results indicate that an overreaction in the speculative stock tends to divert investment capital away from other assets. An examination of the relative magnitude of monthly closing price changes confirm strong correlations between the Dow Jones Average and the more speculative Nasdaq index during the time period 1990 to 2001 and particularly during the two years prior to the peak in March 2000 (0.72 correlation) and the March 2000 to August 2001 decline (0.79 correlation). Supplementary experiments using independent (or legally separate) markets trading the same asset show that a higher price in one market does not lead to a higher one in the other.

RESEARCH ELSEWHERE
Robert A. Olsen-Decision Research

BOOK REVIEWS
Robert A. Olsen-Decision Research