An Experimental Examination of Asset Pricing Under Market Uncertainty

Taylor Jaworskiy (tjaworski@gmail.com) and Erik Kimbrough
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Taylor Jaworskiy: University of Arizona, https://sites.google.com/site/tjaworski/
Authors registered in the RePEc Author Service: Taylor Jaworski

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: In a novel laboratory asset market, traders buy and sell shares of a monopolist while observing its price and transaction history in real-time. Dividends are based on the profitability of the monopolist, also an experimental subject. Despite dividend uncertainty resulting from both monopolist behavior and imperfect information about product market fundamentals, the present value of the dividend stream provides the best estimate of observed asset prices. We compare our data to previous experimental asset markets in which dividends were drawn from a known discrete distribution. While we still detect some mispricing, asset price bubbles are significantly smaller when dividends depend on an observable market process.

Keywords: Asset Markets; Uncertainty; Experimental Economics (search for similar items in EconPapers)
JEL-codes: C91 D84 (search for similar items in EconPapers)
Pages: 48
Date: 2012-12
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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