IDEAS home Printed from https://ideas.repec.org/p/ebg/heccah/1598.html

Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation

Author

Listed:
  • Biais, Bruno

    (HEC Paris)

  • Mariotti, Thomas

    (University of Toulouse 1 Capitole)

  • Moinas, Sophie

    (University of Toulouse 1 - Toulouse School of Economics (TSE))

  • Pouget, Sebastien

    (Toulouse School of Economics)

Abstract

We study asset pricing and risk sharing in experimental financial markets designed to test rational choice and competitive behavior in complete markets. Participants behave competitively but deviate from rationality: approximately 25% of actions are first-order stochastically dominated. We propose a random-choice model predicting that market-clearing prices and average trades converge to the rational-choice competitive equilibrium as market size grows. Our experimental data support this convergence prediction. Structural estimation with CRRA utilities and logit choice probabilities reveals that approximately 20% of participants would have higher expected utility in autarky, suggesting bounded rationality can make market participation welfare-reducing for a significant minority.

Suggested Citation

  • Biais, Bruno & Mariotti, Thomas & Moinas, Sophie & Pouget, Sebastien, 2025. "Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation," HEC Research Papers Series 1598, HEC Paris, revised 08 Dec 2025.
    • Handle: RePEc:ebg:heccah:1598
    DOI: 10.2139/ssrn.5746849
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5746849
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.2139/ssrn.5746849?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Duffy, John & Rabanal, Jean Paul & Rud, Olga A., 2021. "The impact of ETFs in secondary asset markets: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 674-696.
    3. John Duffy & Jean Paul Rabanal & Olga A. Rud, 2019. "The Impact of ETFs on Asset Markets: Experimental Evidence," Working Papers 154, Peruvian Economic Association.
    4. Antonio, Filippin & Marco, Mantovani, 2019. "Risk Aversion and Information Aggregation in Asset Markets," Working Papers 404, University of Milano-Bicocca, Department of Economics, revised Apr 2019.
    5. Sean Crockett & Daniel Friedman & Ryan Oprea, 2021. "Naturally Occurring Preferences And General Equilibrium: A Laboratory Study," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 831-859, May.
    6. Mantovani, Marco & Filippin, Antonio, 2026. "When do prediction markets return average beliefs? Experimental evidence," Games and Economic Behavior, Elsevier, vol. 156(C), pages 135-148.
    7. Crockett, Sean & Friedman, Daniel & Oprea, Ryan, 2017. "Aggregation and convergence in experimental general equilibrium economies constructed from naturally occurring preferences," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2017-501, WZB Berlin Social Science Center.
    8. Heinke, Steve & Olschewski, Sebastian & Rieskamp, Jörg, 2022. "Experiences and Asset Price Dynamics," VfS Annual Conference 2022 (Basel): Big Data in Economics 264017, Verein für Socialpolitik / German Economic Association.
    9. Friedman, Daniel & Habib, Sameh & James, Duncan & Crockett, Sean, 2018. "Varieties of risk elicitation," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2018-501, WZB Berlin Social Science Center.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebg:heccah:1598. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Melon (email available below). General contact details of provider: https://edirc.repec.org/data/hecpafr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.