bubbles and experience an experiment we investigate the occurrence of bubble crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders we find that even with a minority of experienced traders bubbles are substantially abated

an analysis of feed in tariff remuneration models implications for renewable energy investment recent experience from around the world suggests that feed in tariffs fits are the most effective policy to encourage the rapid and sustained deployment of renewable energy there are several different ways to structure a fit policy each with its own strengths and weaknesses this paper presents an overview of seven different ways to structure the remuneration of a fit policy divided into two broad categories those in which remuneration is dependent on the electricity price and those that remain independent from it this paper examines the advantages and disadvantages of these different fit models and concludes with an analysis of these design options with a focus on their implications both for investors and for society

economics of pooling small local electricity prosumers lcoe self consumption abstract the arrival of small scale decentralized energy installations coincides with the emergence of so called prosumers entities households that are producer and consumer of energy in one this research focuses on an electricity prosumer model in the context of the uk market levelized cost of electricity lcoe for photovoltaic pv and wind energy will be modeled for six uk sites additionally self consumption levels for two different load profiles and technologies will be estimated per site the simulations are modeled with homer software and multiple inputs will be varied including natural resource equipment cost maintenance cost equipment life expectancy cost of capital project life and load profiles the modeled self consumption levels show significant differences and varied between 31 and 72 depending on load profile itself and re technologies mixes modeled the pooling of prosumers implied by lower load profile volatility proved to be beneficial to self consumption levels in the modeled scenarios up to 17 6 lcoe showed significant ranges depending on the input parameters and their combination 10 55 p kw h for pv and 2 19 p kw h for wind the combination of these factors is decisive for the final lcoe and the negative effects of less benign factors can be compensated by other parameters when compared to current electricity retail prices of around 15 p kw h around 97 of wind sites and around 4 of pv scenarios implied lcoe reached grid parity the self consumption levels and lcoe analysis indicate the viability of electricity prosumer models

do regulations work a comprehensive analysis of price limits and trading restrictions in experimental asset markets with deterministic and stochastic fundamental values abstract we examine how traders react to two prominent stock market regulations under a constant fundamental value fv process price limits and trading restrictions significantly reduce the price level and mispricing size when traders are inexperienced under a markov process fv there is no evidence for these regulations to reduce mispricing the novel markov process also serves as a testbed for several financial hypotheses related to the regulations we find that price limits do not improve reactions to market news and the binding of price limits magnifies the momentum in the price movements these findings suggest that the scope of these regulations is limited and that they can backfire in some market environments

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

a damped diffusion framework for financial modeling and closed form maximum likelihood estimation abstract asset price bubbles can arise unintentionally when one uses continuous time diffusion processes to model financial quantities we propose a flexible damped diffusion framework that is able to break many types of bubbles and preserve the martingale pricing approach damping can be done on either the diffusion or drift function oftentimes certain solutions to the valuation pde can be ruled out by requiring the solution to be a limit of martingale prices for damped diffusion models monte carlo study shows that with finite time series length maximum likelihood estimation often fails to detect the damped diffusion function while fabricates nonlinear drift function an alternative method based on ait sahalia s specification test on parametric models is proposed

a historical review of promotion strategies for electricity from renewable energy sources in eu countries abstract the core objective of this paper is to elaborate on historically implemented promotion strategies of renewable energy sources and the associated deployment within the european electricity market hence at a first glance the historic development of renewable energy sources in the electricity res e sector is addressed on member state and on sectoral level as well as consequently discussed according to available res e potentials and costs the specific focus of this paper are promotion strategies for res e options as they are the key driver of an efficient and effective res e deployment therefore the paper depicts the main types of different promotion schemes and their properties additionally several cases studies of different european member states show an in depth analysis of the different res e promotion schemes in this context special emphasises are put on the question of effective and efficient promotion scheme designs of different res e technologies generally conducted research led to the conclusion that technology specific financial support measures of res e performed much more effective and efficient than others did hence it is not all about the common question of feed in tariffs vs quota systems based on tradable green certificates but more about the design criteria of implemented res e support schemes

regional distribution of photovoltaic deployment in the uk and its determinants a spatial econometric approach abstract photovoltaic pv panels offer significant potential for contributing to the uk s energy policy goals relating to decarbonisation of the energy system security of supply and affordability the substantive drop in the cost of panels since 2007 coupled with the introduction of the feed in tariff fit scheme in 2010 has resulted in a rapid increase in installation of pv panels in the uk from 26 5mwp in 2009 to over 5gw by the end of 2014 yet there has been no comprehensive analysis of the determinants of pv deployment in the uk this paper addresses this gap by employing spatial econometrics methods to a recently available data set at a fine geographical detail following a traditional regression analysis a general to specific approach has been adopted where spatial variations in the relationships have been examined utilising the spatial durbin model using the cross sectional data relating to the uk nuts level 3 data empirical results indicate that demand for electricity population density pollution levels education level of households and housing types are among the factors that affect pv uptake in a region moreover lagrange multiplier test results indicate that the spatial durbin model may be properly applied to describe the pv uptake relationship in the uk as there are significant regional spillover effects

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

market for information experimental evidence predictions of the noisy rational expectations equilibrium ree model are found to be relatively accurate for both asset and information markets in the laboratory when information about an asset s uncertain dividend is sold to a fixed number of highest bidders prices allocations efficiency and distribution of profit predictions of the full revelation ree model in the asset market dominate the predictions of the walrasian model demand for information shifts to the left and its price declines close to zero when the price of information is fixed at a relatively high level the number of informed agents and the informativeness of the asset market tends to adjust to permit the informed agents to recover their investment in information

underreaction to fundamental information and asymmetry in mispricing between bullish and bearish markets an experimental study abstract in contrast to existing literature we implement experimental asset markets with fluctuating fundamental values following a stochastic process therefore we can measure traders behavior in both bullish and bearish markets we observe underreaction of price changes to changes in fundamental value which induces overvaluation in bearish and undervaluation in bullish markets we also find an asymmetry between markets with bullish fundamental values and those with bearish ones as the former markets show a higher degree of informational efficiency the reason for the observed underreaction lies in the relatively large volatility of the underlying fundamental value process

measuring abnormal performance do stocks overreact abstract a highly controversial issue in financial economies is whether stocks overreact in this paper we find an economically important overreaction effect even after adjusting for size and beta in portfolios formed on the basis of prior five year returns extreme prior losers outperform extreme prior winners by 5 10 per year during the subsequent five years although we find a pronounced january seasonal our evidence suggests that the overreaction effect is distinct from tax loss selling effects interestingly the overreaction effect is substantially stronger for smaller firms than for larger firms returns consistent with the overeaction hypothesis are also observed for short windows around quarterly earnings announcements

emissions pricing spillovers and public investment in environmentally friendly technologies in a second best world of below optimal pollution pricing the public return to r d may be greater than under pigouvian pricing due to excess benefits of increasing abatement or it may be lower since private actors lack the incentives to take full advantage of the new cleaner technologies this paper uses a simple model to demonstrate the interaction between environmental policies r d externalities and the social return to innovation the results indicate that strong public support for innovation in abatement technologies is only justified if at least a moderate emissions policy is in place and spillover effects are significant if emissions policy can adjust to cost changes the public role may be enhanced since private actors will prefer to avoid ratcheting social gains from innovation increase only if innovation can allow emissions to be more fully priced technology policy is more effective with fuller emissions pricing and is better viewed as a complement to than a substitute for mitigation policy

the role of feed in tariff in the curtailment of wind power in china abstract while china s wind power initiative has experienced rapid growth serious curtailment issues persist though some studies have investigated this matter we explain this phenomenon from the novel perspective of excess capacity we first set up a theoretical model to explore the mechanism behind excess investment and find that the sticky feed in tariff fit and declining costs of wind power generate high mark up for wind power investors leading to a higher probability of excessive investment the theoretical prediction is empirically tested with a probit and tobit model using provincial level data between 2009 and 2016 the estimation results show that a 0 1 yuan increase in the mark up leads to a 2 3 increase in the rate of curtailed wind power based on the estimation results we simulate several scenarios to assess quantitatively how an improved policy design could have alleviated the curtailment issue simply increasing the frequency of the fit rate adjustment while maintaining the same subsidy reduction level between 2009 and 2016 could have reduced the curtailed wind power by 23 to 27 billion kwh accounting for 15 17 of actual curtailed wind power if the policy were better designed to reflect the declining trend of wind power costs more accurately the curtailment rates could have been further reduced by 2 81 corresponding to a reduction in wasted wind energy of 43 billion kwh or 28 of actual curtailment although accepting curtailment for a certain period could help to accelerate renewable energy deployment our analysis shows that the fit policy design could have been improved to reduce welfare loss these findings can not only assist the chinese government in framing effective policies but also may be applied to other emerging technologies or industries that require subsidy support

responsive feed in tariff adjustment to dynamic technology development abstract this paper reviews the adjustments of the feed in tariffs for new solar photovoltaic pv installations in germany as pv system prices declined rapidly since 2009 the german government implemented automatic mechanisms to adjust the remuneration level for new installations in response to deployment volumes this paper develops an analytic model to simulate weekly installations of pv systems of up to 30 kw based on project profitability and project duration the model accurately replicates observed market developments and is used to assess different adjustment mechanisms against multiple scenarios for pv system price developments the analysis shows that responsive feed in tariff schemes with frequent tariff adjustments and short qualifying periods reach deployment targets most effectively

the effect of short selling on bubbles and crashes in experimental spot asset markets a series of experiments illustrate that relaxing short selling constraints lowers prices in experimental asset markets but does not induce prices to track fundamentals we argue that prices in experimental asset markets are influenced by restrictions on short selling capacity and limits on the cash available for purchases restrictions on short sales in the form of cash reserve requirements and quantity limits on short positions behave in a similar manner a simulation model based on delong et al 1990 generates average price patterns that are similar to the observed data asset market bubbles are persistent deviations of prices from fundamentals to the extent that bubbles exist they can influence investment levels and the allocation of capital and thereby have considerable economic effects in recognition of their potential importance the question of the existence and pervasiveness of bubbles has been a focus of extensive empirical investigation see e g shiller 1981 blanchard and watson 1982 diba and grossman 1988 and west 1988 these studies yield mixed results regarding the empirical relevance of bubble phenomena one source of the differences in conclusions may be that because the fundamental value of the assets cannot be observed tests of the presence of bubbles are joint tests with the particular specification of the process guiding the evolution of fundamentals also being tested the availability of short selling is widely believed to make bubble formation less likely one rationale for such a belief is the notion that the cause of asset market bubbles is a constraint on the ability of traders to speculate on future downward price movements see e g miller 1977 jarrow 1980 diamond and verrecchia 1987 or figlewski and webb 1993 in the absence of short sales traders may sell only the shares in their portfolios the availability of short sales relaxes this constraint in this paper we study empirically the effect of allowing short sales on both the incidence and magnitude of market bubbles we choose a setting in which the fundamental value of the asset is clearly and unambiguously defined and known at all times and bubbles typically occur namely we use the experimental environment that smith suchanek and williams 1988 introduce while

on the ingredients for bubble formation informed traders and communication bubbles in asset markets have been documented in numerous experiments most experiments in which bubbles occur feature a declining fundamental value this feature has been criticized for being atypical of real financial markets here we experimentally study other ingredients for bubble formation that are common in such markets namely the existence of inside information and communication among traders we find that bubbles and mirages can occur if these additional ingredients are present in particular the mere possibility that some traders are better informed than others can create bubbles surprisingly communication turns out to be counterproductive for bubble formation

renewable energy policies in europe converging or diverging abstract nations today are urgently challenged with achieving a significant increase in the deployment of renewable energies in europe that need has given rise to a debate about the most effective and efficient support strategy whilst the different interests debate whether full european harmonisation or strengthening of national support policies for electricity from renewable energy sources res e is the best way forward individual national support schemes are rapidly evolving this study investigates how the eu member states have applied support policy types over the last decade by identifying predominant developments in the application of feed in tariffs premiums tradeable green certificates tax incentives investment grants and financing support for specific technologies wind biomass pv this study shows that europe is currently experiencing certain tendencies towards a bottom up convergence of how national policy makers design res e policy supports while some outliers remain the policy supports of most countries become more similar in the policy types applied dominance of feed in tariffs and in their scope of implementation differentiation for installation sizes and stacking of multiple instruments these trends in national decision making which show tendencies of convergence could make an eu driven top down harmonisation of support either dispensable or at least depending on the agreement less controversial

nonspeculative bubbles in experimental asset markets lack of common knowledge of rationality vs actual irrationality we report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets in a setting in which speculation is not possible bubbles and crashes are observed the results suggest that the departures from fundamental values are not caused by the lack of common knowledge of rationality leading to speculation but rather by behavior that itself exhibits elements of irrationality much of the trading activity that accompanies bubble formation in markets where speculation is possible is due to the fact that there is no other activity available for participants in the experiment

which renewable energy policy is a venture capitalist s best friend empirical evidence from a survey of international cleantech investors governments around the world have adopted ambitious targets to increase the share of renewable energy and reduce greenhouse gas emissions they pursue a variety of policy approaches to achieve these targets it has been a popular theme for contributions in energy policy to investigate the effectiveness of such policies this article adds a new perspective to the debate namely looking at the policy preferences of private investors in innovative clean energy technology firms we surveyed 60 investment professionals from european and north american venture capital and private equity funds and asked them to assess the effectiveness of various policies in terms of stimulating their interest to invest in innovative clean energy technologies in addition to quantitative rankings we use qualitative interview data to capture additional information on why investors prefer some policies over others the combined analysis compensates for the inherent limitations of a quantitative ranking using generic policy types the results of this exploratory analysis demonstrate that all other things being equal investors in our sample perceived feed in tariffs to be the most effective renewable energy policy the overall preference for feed in tariffs is even more pronounced among investors based in europe and with higher exposure to clean energy

how much information is incorporated in financial asset prices experimental evidence we propose a new estimation method and use experimental data from multiple double auction experiments in the literature to directly estimate how much information is incorporated in financial market prices we find that public information is almost completely reflected in prices but that surprisingly little private information less than 50 is incorporated in prices our estimates therefore suggest that while semi strong informational efficiency is consistent with the data financial market prices may be very far from strong form efficiency we compare our estimates with beliefs of economists surveyed at the econometric society meetings and find that economists and finance researchers alike expect market prices to reflect considerably more private information than what we estimated

variable renewable energy technologies in the turkish electricity market quantile regression analysis of the merit order effect abstract the share of variable renewable energy sources in power supply has increased significantly in many countries however this increase has also created problems in electricity markets while the average day ahead market price has declined in several markets the merit order effect the remuneration mechanisms in some countries have to be revised due to the surge in financial costs yet further research is needed to understand the implications of the merit order effect for remuneration mechanisms thoroughly accordingly this study aims to contribute to the literature through employing a quantile regression model to analyze the merit order effect and discuss its implications for the remuneration mechanism in turkish electricity market model results show significant negative merit order effect for both wind and run of river hydro technologies however this effect varies with respect to demand price level and technology moreover the contribution of these technologies to the total welfare in the turkish electricity market does not favor fixed price payments in conclusion it is recommended that the remuneration mechanism is revised to include the temporal value of variable renewable energy sources and electricity market design should reflect the locational value of variable renewable energy sources in turkey

efficiency of experimental security markets with insider information an application of rational expectations models the study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one priced security returns to the security depended upon a randomly drawn state of nature some agents insiders whose identity was unknown to other agents knew the state before the markets opened with replication of market conditions the predictions of a fully revealing rational expectations model are relatively accurate prices adjusted immediately to near rational expectations prices profits of insiders were virtually indistinguishable from non insiders and efficiency levels converged to near 100 percent

nature or nurture what determines investor behavior abstract using data on identical and fraternal twins complete financial portfolios we decompose the cross sectional variation in investor behavior we find that a genetic factor explains about one third of the variance in stock market participation and asset allocation family environment has an effect on the behavior of young individuals but this effect is not long lasting and disappears as an individual gains experience frequent contact among twins results in similar investment behavior beyond a genetic factor twins who grew up in different environments still display similar investment behavior our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs we attribute the genetic component of asset allocation the relative amount invested in equities and the portfolio volatility to genetic variation in risk preferences

fat tails and volatility clustering in experimental asset markets abstract this paper presents results from experimental asset markets with asymmetric fundamental information we observe leptokurtic returns and a slowly decaying autocorrelation function of absolute returns in contrast to results from heterogeneous agent models hams we find that noise has no significant influence on the emergence of fat tails instead we observe a significantly positive relationship between the degree of heterogeneity of fundamental information and absolute returns which suggests that heterogeneous fundamental information is the source of fat tails with respect to volatility clustering we discover an intra periodical pattern where absolute returns decrease after the arrival of new asymmetric fundamental information

do policy mix characteristics matter for low carbon innovation a survey based exploration of renewable power generation technologies in germany abstract policy mixes may play a crucial role in redirecting and accelerating innovation towards low carbon solutions thus addressing a key societal challenge towards this end some argue that the characteristics of such policy mixes matter greatly yet with little empirical evidence backing up such claims in this paper we explore this link between policy mix characteristics and low carbon innovation using the research case of the transition of the german electricity system towards renewable energy our empirical insights are based on an innovation survey administered to german manufacturers of renewable power generation technologies which builds on the community innovation survey for our purposes we adjusted the survey to better capture companies perceptions of policy mixes employing a bivariate tobit model we find evidence that companies perceptions regarding the consistency and credibility of the policy mix are positively associated with their innovation expenditures for renewable energies and this positive link intensifies when considering the mutual interdependence of these policy mix characteristics in contrast neither the comprehensiveness of the instrument mix nor the coherence of policy processes were found to be related to innovation expenditures overall these findings suggest that future research on low carbon and eco innovation should pay greater attention to the characteristics of policy mixes rather than focusing on policy instruments only finally our findings indicate a need to consider how policy may be measured in innovation surveys to generate better informed policy advice regarding the greening of innovation

j shaped returns to timing advantage in access to information experimental evidence and a tentative explanation abstract the question of how useful information is in financial markets has been discussed for decades and is still unresolved in this paper we challenge the widely held belief that additional information is never a disadvantage we present results from experimental financial markets with asymmetrically informed traders in all treatments we conduct we find a j shaped distribution of returns while the best informed outperform all others average informed traders have significantly lower returns than the least informed this can mainly be attributed to trend reversals in the fundamental information prices in our markets do not reflect ree but rather naive trader equilibrium

is more information always better experimental financial markets with cumulative information abstract we study the value of information in financial markets by asking whether having more information always leads to higher returns we address this question in an experiment where information about an asset s intrinsic value is cumulatively distributed among traders we find that only the very best informed traders i e insiders significantly outperform less informed traders however there is a wide range of information levels from zero information to above average information levels where additional information does not yield higher returns the latter result implies that the value of additional information need not be strictly positive

futures contracting and dividend uncertainty in experimental asset markets prices in experimental asset markets tend to bubble and then crash to dividend value at the end of the asset s useful life explanations for this phenomenon are 1 that participants cannot form reliable future price expectations or 2 dividend risk aversion we report the results of experiments to test these hypotheses in one experimental series a futures market is introduced so that participants can obtain information on future share prices in another series of experiments the per period dividend is known with certainty the futures market treatment reduced the bubble the certain dividend treatment had little effect on the character of bubbles with inexperienced traders copyright 1995 by university of chicago press

individual expectations limited rationality and aggregate outcomes recent studies suggest that the type of strategic environment or expectation feedback can have a large impact on whether the market can learn the rational fundamental price we present an experiment where the fundamental price experiences large unexpected shocks markets with negative expectation feedback strategic substitutes quickly converge to the new fundamental while markets with positive expectation feedback strategic complements do not converge but show underreaction in the short run and overreaction in the long run a simple evolutionary selection model of individual learning explains these differences in aggregate outcomes

rational expectations equilibrium with conditioning on past prices a mean variance example abstract the paper uses an intertemporal mean variance model of the market for a dividend paying risky asset to analyse rational expectations equilibria when all agents condition their expectations on past rather than current prices the main result shows that if the time span between successive market periods is short the market will approximate full informational efficiency arbitrarily closely yet the returns to being informed are bounded away from zero this contrasts with the grossman stiglitz proposition that markets cannot come close to informational efficiency if the acquisition of information is costly

three variants on the allais example three variants on the famous allais example were administered to student subjects two variants involved small changes in the example yet greatly diminished the qualitative behavior known as the allais paradox the third variant is almost a direct test of daniel kahneman and amos tversky s certainty effect against mark machina s fanning out hypothesis the results favor the certainty effect over the fanning out hypothesis for at least the case of straight line indifference curves copyright 1989 by american economic association

three minimal market institutions with human and algorithmic agents theory and experimental evidence we define and examine the performance of three minimal strategic market games sell all buy sell and double auction in laboratory relative to the predictions of theory unlike open or partial equilibrium settings of most other experiments these closed exchange economies have limited amounts of cash to facilitate transactions and include feedback general equilibrium theory since it abstracts away from market mechanisms and has no role for money or credit makes no predictions about how the paths of convergence to the competitive equilibrium may differ across alternative mechanisms

biological correlates of the allais paradox we conducted a questionnaire study with student subjects to look for explicit correlations between selected biological characteristics of the subjects and manifestation of the allais paradox in the pattern of their choices between sets of two pairs of risky prospects we found that particular characteristics such as gender menstrual cycle mother s age at delivery parenthood second to fourth digit ratio perceived negative life events and emotional state can be related to the paradox women particularly when not menstruating are less susceptible to the paradox those born to not too young mothers are also less prone to the paradox the same holds true for men who have fathered children and had been exposed to high levels of prenatal testosterone people who had experienced many negative life events and those who were anxious excited aroused happy active or fresh at the time of the experiment further left handers and atheists may be less inclined to display the paradox

informed speculation with imperfect competition competitive rational expectations models have the unsatisfactory property dubbed the schizophrenia problem by hellwig that each trader takes the equilibrium price as given despite the fact that he influences that price an examination of information aggregation in a non competitive rational expectations model using a nash equilibrium in demand functions shows that the schizophrenia problem is avoided by having each trader take into account the effect his demand has on the equilibrium price given a distribution of private information across traders prices reveal less information than in the competition equilibrium and prices no longer become fully informative in the limit as noise trading vanishes or as traders become risk neutral with small traders the model may become one of monopolistic competition not perfect competition in contrast to the competitive model a reasonable model of endogenous acquisition of costly private information is obtained even when traders are risk neutral