Testing market regulations in experimental asset markets – The case of margin purchases

Margin requirements regulate the risks of leveraged positions in financial markets. Violated margin trigger calls leading to automated liquidation open positions. Due a lack active regulation, however, empirical studies are not able capture effect regulation on asset market performance. Instead, we conduct an experimental finance study understand how regulations, and particular purchases, influence Our results indicate that permitting purchases inflates prices; fact, trading positively correlates with prices. In robustness check, also permit short sales which curb though eliminate effects from purchases.