Prices in experimental asset markets under uncertainty
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.
Volume (Year): 43 (2009)
Issue (Month): 2 ()
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