An Experimental Examination of Asset Pricing Under Market Uncertainty
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.
|Date of creation:||Dec 2012|
|Contact details of provider:|| Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada|
Web page: http://www.sfu.ca/economics.html
More information through EDIRC
|Order Information:|| Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada|
Web: http://www.sfu.ca/economics/research/publications.html Email:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles Noussair & Steven Tucker, 2006. "Futures Markets And Bubble Formation In Experimental Asset Markets ," Pacific Economic Review, Wiley Blackwell, vol. 11(2), pages 167-184, 06.
- Porter, David P & Smith, Vernon L, 1995. "Futures Contracting and Dividend Uncertainty in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 68(4), pages 509-541, October.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001.
"Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality,"
Econometric Society, vol. 69(4), pages 831-859, July.
- Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
- Kenneth D. West, 1988.
"Bubbles, Fads, and Stock Price Volatility Tests: A Partial Evaluation,"
NBER Working Papers
2574, National Bureau of Economic Research, Inc.
- West, Kenneth D, 1988. " Bubbles, Fads and Stock Price Volatility Tests: A Partial Evaluation," Journal of Finance, American Finance Association, vol. 43(3), pages 639-656, July.
- Cary A. Deck & Bart J. Wilson, 2003. "Automated Pricing Rules in Electronic Posted Offer Markets," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 208-223, April.
- Mark van Boening & Vernon L. Smith & Charissa P. Wellford, 2000. "Dividend timing and behavior in laboratory asset markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 567-583.
- Cary A. Deck & Bart J. Wilson, 2006. "Tracking Customer Search to Price Discriminate," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 280-295, April.
When requesting a correction, please mention this item's handle: RePEc:sfu:sfudps:dp12-21. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Working Paper Coordinator)
If references are entirely missing, you can add them using this form.