The Department of Economics Recruiting Seminar Series presents
"An Experimental Test of the Lucas Asset Pricing Model"
with John Duffy, Professor of Economics, University of Pittsburgh
January 21, 2014
Social Science Plaza A, Room 2112
Duffy implements a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In one treatment he imposes diminishing marginal returns to cash to incentivize consumption-smoothing across periods, while in a second treatment there is no induced motive for trade. In the former case subjects smooth consumption, and assets trade at a discount relative to the risk-neutral fundamental price. This under-pricing is a departure from the ``bubbles'' observed in the experimental asset pricing experiments of Smith et al. (1988). In his second treatment with no induced motive for trade, assets trade at a premium relative to expected value and shareholdings are highly concentrated.
For further information, please contact Jennifer dos Santos, firstname.lastname@example.org or 949-824-5788.