Investor experience and information do not discourage asset price bubbles

It is often believed that markets with more experienced investors exhibit fewer bubbles. The same is believed of markets where investors have additional information about fundamentals. Anita Kopányi-Peuker and Matthias Weber provide evidence that these beliefs are not necessarily true. In contrast, bubbles may rise faster in markets with more experienced investors. This is in line with a model in which naïve investors extrapolate trends, which sophisticated investors take into account when making decisions.