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Only Paul Could Go To Changchun

Asset pricing and risk‐sharing in a complete market: An experimental investigation

5/3/2017

 
Here.

We design an experiment that closely emulates and tests the standard model of complete competitive markets, without imposing parametric restrictions on preferences. Consistent with theory, aggregated elicited supply and demand curves cross at the expected dividend when there is no aggregate risk, and at a lower price when there is aggregate risk. In contradiction with theory, individual participants frequently make choices that violate Örst order stochastic dominance. We propose a random choice model which reconciles the above mentioned Öndings and is also consistent with additional features of the data, such as, e.g., large mistakes being less frequent than smaller ones. 

From:

Bruno Biais 
Thomas Mariotti 
Sophie Moinas 
Sébastien Pouget

Toulouse School of Economics

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