Experimental Asset Markets with an Indefinite Horizon
John Duffy (),
Janet Hua Jiang and
Additional contact information
Janet Hua Jiang: Bank of Canada
Huan Xie: Concordia University, CIREQ
No 08-2019, Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ
We study the trade of indefinitely-lived assets in experimental markets. The traded prices of these assets are on average more than 40% below the risk-neutral fundamental value under the expected utility assumption. We examine the effects of three interrelated factors for the traded price, payoff uncertainty about the asset’s dividend payments, horizon uncertainty about the duration of trade, and the expected utility assumption. Our results suggest that horizon uncertainty does not significantly affect the traded price. Incorporating risk aversion into non-expected utility models with re-cursive preferences and probability weighting can rationalize the low prices observed in our indefinite-horizon asset markets.
Keywords: asset pricing; behavioral finance; experiments; indefinite horizon; random termination; risk and uncertainty; expected utility; Epstein-Zin recursive preferences; probability weighting (search for similar items in EconPapers)
JEL-codes: C91 C92 D81 G12 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Experimental Asset Markets with An Indefinite Horizon (2019)
Working Paper: Experimental Asset Markets with An Indefinite Horizon
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:08-2019
Access Statistics for this paper
More papers in Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ Contact information at EDIRC.
Bibliographic data for series maintained by Sharon BREWER ().