Teaching financial crises: A leverage experiment.
College students often struggle to understand the prevalence of asset price bubbles and the difficulty of timing asset purchases and sales. Even economics students are consistently surprised when bubbles burst. These breaks can have real macroeconomic effects, particularly when the price surge is fu...
| Publicado en: | Southern Economic Journal Vol. 92; no. 4; pp. 1205 - 1224 |
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| Autores principales: | , , |
| Formato: | Artículo |
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Wiley-Blackwell
Apr2026
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=193164479&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 193164479 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00384038 SEJ jtl: Southern Economic Journal issn: 00384038 maglogo: N pubinfo: dt: Apr2026 vid: 92 iid: 4 pid: 480 pub: Wiley-Blackwell artinfo: ui: 193164479 10.1002/soej.12775 ppf: 1205 ppct: 19 formats: fmt: – @attributes: type: T – @attributes: type: C – @attributes: type: P size: 3.6MB tig: atl: Teaching financial crises: A leverage experiment. aug: au: Coppock, Lee Harper, Daniel Holt, Charles affil: Department of Economics, University of Virginia, Charlottesville Virginia,, USA Department of Economics, James Madison University, Harrisonburg Virginia,, USA su: Financial crises Macroeconomics Financial leverage Economic bubbles Experimental economics Great Recession, 2008-2013 Behavioral economics Investment risk sug: subj: Financial crises Macroeconomics Financial leverage Economic bubbles Experimental economics Great Recession, 2008-2013 Behavioral economics Investment risk keyword: classroom experiment financial crises leverage classroom experiment financial crises leverage ab: College students often struggle to understand the prevalence of asset price bubbles and the difficulty of timing asset purchases and sales. Even economics students are consistently surprised when bubbles burst. These breaks can have real macroeconomic effects, particularly when the price surge is fueled by leverage. This paper describes a web‐based class experiment designed to teach students about how leverage increases the magnitude and ramifications of bubbles. Participant students choose between investing in an asset with risky returns (which can be leveraged) and a safe asset that pays interest. These markets consistently generate prices well above fundamental values. Furthermore, the price bubbles are generally more extreme when credit is easier (low cash down‐payment requirements), when exogenous incomes are higher, and when the duration of the experiment is longer. The class results can be used to draw parallels to examples of leveraged bubbles and their consequences, such as the 2007–2009 Great Recession. This experiment is available for instructors online and is particularly well suited for Principles of Macroeconomics, Money and Banking, and Behavioral Finance classes. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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