Super-exponential bubbles in lab experiments: Evidence for anchoring over-optimistic expectations on price

We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster than exponential due to positive feedback. We show that the positive feedback operates by traders continuously upgrading their over-optimistic expectations of future returns based on past prices rather than on realized returns. (C) 2013 Elsevier B.V. All rights reserved.