Pricing Indefinitely Lived Assets: Experimental Evidence

John Duffy, Janet Jiang and Huan Xie

Staff Working Papers from Bank of Canada

Abstract: We study indefinitely lived assets in experimental markets and find that the traded prices of these assets are, on average, about 40% of the risk-neutral fundamental value. Neither uncertainty about the value of total dividend payments nor horizon uncertainty about the duration of trade can account for this low traded price. An Epstein and Zin (1989) recursive preference specification that models the dynamic realization of dividend payments and incorporates risk preferences can rationalize the low traded price observed in our indefinitely lived asset market.

Keywords: Asset pricing; Financial markets (search for similar items in EconPapers)
JEL-codes: C92 D81 G12 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2023-04
New Economics Papers: this item is included in nep-exp and nep-upt
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Related works:
Journal Article: Pricing Indefinitely Lived Assets: Experimental Evidence (2024)
Working Paper: Pricing Indefinitely Lived Assets: Experimental Evidence (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:23-25

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