A (Bubble-Free) General Equilibrium Approach to Asset Pricing Experiments
نویسندگان
چکیده
We use laboratory experiments to test the modern, consumption-based general equilibrium approach to asset pricing which posits that agents buy and sell assets for the purpose of intertemporally smoothing consumption. These asset pricing models are widely used by macroeconomists and finance researchers but have not yet been subjected to experimental testing. This laboratory approach enables us to induce several fundamental factors which, according to the theory, determine asset prices, such as risk and time preferences, and the process for dividend payments. Preliminary evidence suggests that either intertemporal consumption-smoothing or what can be interpreted as bankruptcy risk in our design (or both) induce stable prices and strongly inhibit the formation of asset price bubbles, a stark departure from most recent asset pricing experiments. This paper is very preliminary and incomplete. Please do not circulate. Contact: [email protected] Contact: [email protected]
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