Theories on under- and over-reaction in asset prices fall into three types: (1) they are respectively driven by different psychological factors; (2) they are driven by different types of investors; and (3) they reflect un-modeled risk. We design an asset market where information arrives...

We examine the effect on asset mispricing of different accounting methods in an experimental asset market characterized by bubbles and crashes. In particular, we study three alternative asset value reporting treatments: (1) Fair Value (also known as Mark-to-Market – M2M), (2) Historical Cost...

Key differential structural characteristics of environments studied in previous market experiments have documented large divergences in their observed performance, particularly discrepancies in their convergence to expected equilibrium outcomes. We investigate why this should be so. The type of...

Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company’s sales to movie box office receipts. Recent research suggests prediction...

In an experimental setting, we study the role of emotions in markets. Our experimental market is modeled on those of Smith, Suchanek, and Williams (1988) and Caginalp, Porter, and Smith (2001). Participants play part in a laboratory market where they can trade a risky asset over a computer...

Retail order imbalance positively correlates with returns in the days following trades. However, in aggregate, retail investor trades lose money over these same periods. Why? 1) While order imbalance tests value or equally weight stocks, retail purchases are concentrated in stocks earning large...

The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models...

This experimental study compares sequential and simultaneous election contests. Consistent with the theory, we find evidence of the “New Hampshire effect” in the sequential contests, i.e., the winner of the first electoral battle wins the overall contest with much higher probability than the...

In this paper, we generalize the General Lotto game (budget constraints satisfied in expectation) and the Colonel Blotto game (budget constraints hold with probability one) to allow for battlefield valuations that are heterogeneous across battlefields and asymmetric across players, and for the...