Our research uses the laboratory to study
a phenomenon that has fascinated social
scientists for many years. Does irrational
exuberance in markets cause people to bid
up prices in anticipation of heady future
capital gains? For example, do housing
prices reflect a dwelling’s true value, or
is there some speculative component that
drives the market? Our experiments show
asset prices are rooted in fundamental
value. The typical person is averse to risk and there is no evidence whatsoever that prices deviate from economic fundamentals.

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