Financial contagion and the wealth effect: An experimental study
| Autor: | Anna Bayona, Oana Peia |
|---|---|
| Rok vydání: | 2022 |
| Předmět: |
Organizational Behavior and Human Resource Management
Economics and Econometrics Financial contagion media_common.quotation_subject 05 social sciences Diversification (finance) Monetary economics Investment (macroeconomics) Wealth effect 0502 economics and business Economics Coordination game 050207 economics Laboratory experiment Imitation Global game media_common 050205 econometrics |
| Zdroj: | Journal of Economic Behavior & Organization. 200:1184-1202 |
| ISSN: | 0167-2681 |
| DOI: | 10.1016/j.jebo.2020.08.001 |
| Popis: | We design a laboratory experiment to test the importance of wealth as a channel for financial contagion across markets with unrelated fundamentals. In a sequential global game, we analyze the decisions of a group of investors that hold assets in two markets. We consider two treatments that vary the level of diversification of these assets across markets. In both treatments, we find evidence of financial contagion. When investors have completely diversified portfolios, we provide evidence of contagion due to a wealth effect: for certain ranges of fundamentals, we show that a decrease in wealth from the investment in the first market makes withdrawals more likely in the second, thereby increasing the probability of a crisis. When portfolio diversification is small, then social imitation is relevant in explaining contagion. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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