EconPapers    
Economics at your fingertips  
 

Asset pricing experiments

Henk van de Velden
Additional contact information
Henk van de Velden: CeNDEF, University of Amsterdam

No 5A.3, CeNDEF Workshop Papers, January 2001 from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: In this paper we report the findings of an asset pricing experiment. In our experiment we use the same setup as in the paper of Brock and Hommes (1997). The participants in the experiment had to predict the price of period t+1 at time t given all previous prices up till period t-1. The rational or fundamental price pt* is given by the discounted sum of future dividends. Participants in the experiment are motivated by forecasting accuracy. In the theoretical asset pricing model there are 'bubble solutions' growing at the risk free rate of return 1+r. These bubble solutions are perfect foresight solutions and thus equally attractive as the fundamental solution. We find that the prices in the experiment are significantly different from the fundamental price in particular the experimental asset market seems to be undervalued. Another result was that the variance of the prices in the experiment is much higher than the variance under rational expectations, which might be an explanation of excess volatility as observed in real financial asset markets.

Date: 2001-01-04
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ams:cdws01:5a.3

Access Statistics for this paper

More papers in CeNDEF Workshop Papers, January 2001 from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().

 
Page updated 2019-07-24
Handle: RePEc:ams:cdws01:5a.3