scholarly journals Basic Principles of Asset Pricing Theory: Evidence from Large-Scale Experimental Financial Markets

2000 ◽  
Author(s):  
Peter L. Bossaerts ◽  
Charles R. Plott
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Large Scale ◽  
Basic Principles ◽  
Asset Pricing Theory ◽  
Pricing Theory

Experiments with Financial Markets: Implications for Asset Pricing Theory

2001 ◽  
Vol 45 (1) ◽  
pp. 17-32 ◽  
Author(s):  
Peter Bossaerts
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Likelihood Function ◽  
Expected Returns ◽  
Basic Principles ◽  
State Variable ◽  
Asset Pricing Theory ◽  
Rational Learning ◽  
Full Knowledge ◽  
Pricing Theory

This article surveys financial markets experiments from a particular vantage point, namely, asset pricing theory. The goal is to assess to what extent these experiments have (and could) shed light on the validity of the basic principles of asset pricing theory, namely (i) that markets equilibrate to the point that expected returns are proportional to covariance with aggregate risk, (ii) that markets aggregate dispersed information. There appears to be solid support for (i), yet the evidence regarding (ii) is mixed. The reason for the latter is hard to determine, because of features in the experimental design that are at odds with standard asset pricing theory (e.g., the payoff on a security depends on the identity of the holder). Where we can interpret the results, the article demonstrates that the occasional aggregation failures (“mirages”) agree with rational learning. More specifically, their number is consistent with the mistakes one expects a Bayesian to make even when she has full knowledge of the likelihood function (of any signals conditional on the value of the state variable that she is learning).

An Asset Pricing Theory of Volatility Tail Behavior

2010 ◽  
Author(s):  
Gurdip S. Bakshi ◽  
Dilip B. Madan ◽  
George Panayotov
Keyword(s):  
Asset Pricing ◽  
Tail Behavior ◽  
Asset Pricing Theory ◽  
Pricing Theory

Dynamic asset pricing theory with uncertain time-horizon

2005 ◽  
Vol 29 (10) ◽  
pp. 1737-1764 ◽  
Author(s):  
Christophette Blanchet-Scalliet ◽  
Nicole El Karoui ◽  
Lionel Martellini
Keyword(s):  
Asset Pricing ◽  
Time Horizon ◽  
Asset Pricing Theory ◽  
Pricing Theory ◽  
Uncertain Time ◽  
Dynamic Asset Pricing

Asset Pricing Theory

2010 ◽  
pp. 199-219
Author(s):  
Arjun K. Gupta ◽  
Wei-Bin Zeng ◽  
Yanhong Wu
Keyword(s):  
Asset Pricing ◽  
Asset Pricing Theory ◽  
Pricing Theory
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