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Prices in experimental asset markets under uncertainty

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  • Carmela Di Mauro

Abstract

This paper presents an experiment which investigates whether asset prices are affected in markets where state probabilities are not exactly known and traders have to form subjective probabilities of payoffs. Results show that the presence of vague probabilities leads to higher average prices with respect to assets characterised by known probabilities. However, prices under known and vague probabilities draw closer when traders get a sounder understanding of how to arbitrate between markets.

Suggested Citation

  • Carmela Di Mauro, 2009. "Prices in experimental asset markets under uncertainty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(2), pages 149-163.
    • Handle: RePEc:taf:nzecpp:v:43:y:2009:i:2:p:149-163
    DOI: 10.1080/00779950903005507
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    References listed on IDEAS

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    1. Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-859, July.
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    Cited by:

    1. Carmela Mauro, 2008. "Uncertainty Aversion Vs. Competence: An Experimental Market Study," Theory and Decision, Springer, vol. 64(2), pages 301-331, March.

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