Fat tails and volatility clustering in experimental asset markets

This paper presents results from experimental asset markets with asymmetric fundamental information. We observe leptokurtic returns and a slowly decaying autocorrelation function of absolute returns. In contrast to results from heterogeneous agent models (HAMs), we find that noise has no significant influence on the emergence of fat tails. Instead, we observe a significantly positive relationship between the degree of heterogeneity of fundamental information and absolute returns, which suggests that heterogeneous fundamental information is the source of fat tails. With respect to volatility clustering, we discover an intra-periodical pattern where absolute returns decrease after the arrival of new asymmetric fundamental information.