Experimental Research On The Relation Between Risk Attitude And Exchange Rate Bubbles

RMB keep increasing in value fast and persistently many experts think that increase of currency in China has been not able to reflect Chinese real increase of economic now. They think it just increases passively with inflow of US dollar and there are so many bubbles in US dollar that absorbing US dollar makes lots of bubbles in RMB. Bubbles in RMB makes many bubbles appear in Chinese people's income. This will threaten Chinese economics development. So, It looks very important to research how to reduce bubbles in RMB.Much of research about exchange rate bubbles just comes down to macroscopical economic and little touches upon investors' individual behavior. Some literature were based on the hypothesis that investors are rational even though they involved individual behavior. But many facts had showed that people's senses are limited. Because of limitations had been listed prevenient research on exchange rate bubbles is limited to explain the bubble phenomenon and give guidance to reduce bubbles. The author applies experimental methods can conquer those problems by researching real humans' behavior.Comparing experiments' results is the author's main measure. There are four experiments: one experiment to elicit risk attitude, three experiments for foreign exchange markets. The first experiment has two groups of subjects: one group come from students, another group are made of experienced people. Author get two groups of subjects' risk attitude from the first experiment and compare the results. There are two assets in the three foreign exchange market experiments. Both of them are foreign exchange assets without risk in the first foreign exchange experiment. And in the second and third experiment one asset is still without risk but another one is risky asset. The risky asset's risk in the third experiment are more than that in the second. Author compared exchange rate bubbles in three experiments and using the results of the risk attitude experiment eliminated risk strong lovers trade factors to attain some significant conclusions.The mainly conclusions of this dissertation are as follows: The first, the results of experiments in this dissertation show that a majority of Chinese investors are risk preferences. The second, exchange rate bubbles add with the increasing of assets risk. The third, risk preference is the main reason of exchange rate bubbles.On the basis of experimental results, we proposed some feasible advices such as encouraging to develop rational institution investors, controlling foreign exchange risk, setting up professional consultation institutions to instruct investors and leading them to study from practice.In the last part of the dissertation we drew the conclusions and give brief view on the future study in the field of experiments designing and exchange rate bubbles theories.