We experimentally investigate how price expectations are formed in a large asset market where subjects' only task is to forecast the future price of a risky asset. The realized prices depend on these expectations. We observe small (6 participants) and large markets (about 100 participants). In...

We develop a general framework for measuring biases in expectation formation. The method is based on the insight that biases can be inferred from the response of forecast errors to past news. Empirically, biases are measured by flexibly estimating the impulse response function of forecast...

This paper analyzes the equilibrium pricing implications of contagion risk in a Lucastree economy with recursive preferences and jumps. We introduce a new economic channel allowing for the possibility that endowment shocks simultaneously trigger a regime shift to a bad economic state. We...

The article presents a historical review of the literature related to the empirical problem of excessive risk premium. The risk premium (the difference between the return on equities and risk-free rate) observed in financial markets cannot be reconciled with theoretical models of financial...

We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on...