Speculators buy an asset hoping to sell it later to investors with higher private valuations. If agents are uncertain about the distribution of private valuations and about the beliefs of others about this distribution, a beauty contest with an infinite hierarchy of beliefs arises. Under...

We analyse the optimal Initial Public Offering (IPO) mechanism in a multidimensional adverse selection setting where institutional investors have private information about the market valuation of the shares, the intermediary has private information about the demand, and the institutional...

We analyze theoretically and empirically the implications of information asymmetry for equilibrium asset pricing and portfolio choice. In our partially revealing dynamic rational expectations equilibrium, portfolio separation fails, and indexing is not optimal. We show how uninformed investors...

Biographical note: BossaertsPeter: Peter Bossaerts is William D. Hacker Professor of Economics and Management, Professor of Finance, and Executive Officer for the Social Sciences at the California Institute of Technology. He is the coauthor of "Lectures on Corporate Finance".

This monograph sets the stage for experiments by first examining a sample data set that looks very much like the typical historical data one gathers from the field, only it was actually generated in the laboratory so that we know what really went on. The example demonstrates how misleading the...