Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2016-08-09
Number: 16-059/I
Author-Name: Matthias Weber
Author-Workplace-Name: Bank of Lithuania, and Vilnius University, Lithuania
Author-Name: John Duffy
Author-Workplace-Name: University of California, Irvine, United States
Author-Name: Arthur Schram
Author-Workplace-Name: University of Amsterdam, the Netherlands
Title: An Experimental Study of Bond Market Pricing
Abstract: An important feature of bond markets is the relationship between initial public offering prices and the probability of the issuer defaulting. First, this probability affects the bond prices. Second, IPO prices determine the default probability. Though market equilibrium has been shown to predict well for other assets, it is a priori unclear whether markets will yield competitive prices when such interaction with the default probability occurs. We develop a flexible bond market model that is easily implemented in the laboratory and examine how subjects price bonds. We find that subjects learn to price bonds well after only a few repetitions.
Classification-JEL: C92, C90, D47, G12
Keywords: bond markets, experimental finance, experimental markets, asset pricing, learning
File-Url: https://papers.tinbergen.nl/16059.pdf
File-Format: application/pdf
File-Size: 405433 bytes
Handle: RePEc:tin:wpaper:20160059