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The CAPM in Thin Experimental Financial markets

Bossaerts, Peter and Plott, Charles (2002) The CAPM in Thin Experimental Financial markets. Journal of Economic Dynamics and Control, 26 (7-8). pp. 1093-1112. ISSN 0165-1889 . https://resolver.caltech.edu/CaltechAUTHORS:20140317-152527222

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Abstract

We report on small-scale experiments of simple, repeated asset markets in two risky securities and one risk-free security. As in large-scale experiments, steady convergence towards the CAPM is discovered, but the process is slower and convergence halts before reaching the actual equilibrium. There is evidence that subjects gradually move up in mean-variance space, in accordance with the CAPM. Yet, adjustment stops, presumably because of subjects’ hesitance in the face of market thinness. This hesitance can be optimal because of the multidimensional nature of the desired trades. Because of market thinness, subjects have difficulty implementing bundles of trades in a set of parallel markets based on the MUDA trading mechanism.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1016/S0165-1889(01)00046-XDOIUNSPECIFIED
http://www.sciencedirect.com/science/article/pii/S016518890100046XPublisherUNSPECIFIED
ORCID:
AuthorORCID
Bossaerts, Peter0000-0003-2308-2603
Additional Information:© 2002 Elsevier Science B.V. Received in revised form 1 February 2000. The financial support of the National Science Foundation and the California Institute of Technology Laboratory for Experimental Research in Economics and Political Science is gratefully acknowledged. An anonymous referee provided constructive comments.
Funders:
Funding AgencyGrant Number
NSFUNSPECIFIED
Caltech Laboratory for Experimental Research in Economics and Political ScienceUNSPECIFIED
Subject Keywords: Capital asset pricing model (CAPM); Experimental economics; Financial markets; Equilibrium; Equilibration
Issue or Number:7-8
Classification Code:JEL: G12; C92; D59
Record Number:CaltechAUTHORS:20140317-152527222
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20140317-152527222
Official Citation:Peter Bossaerts, Charles Plott, The CAPM in thin experimental financial markets, Journal of Economic Dynamics and Control, Volume 26, Issues 7–8, July 2002, Pages 1093-1112, ISSN 0165-1889, http://dx.doi.org/10.1016/S0165-1889(01)00046-X. (http://www.sciencedirect.com/science/article/pii/S016518890100046X)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44369
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:18 Mar 2014 17:28
Last Modified:03 Oct 2019 06:17

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