Published July 2002
| public
Journal Article
The CAPM in Thin Experimental Financial markets
- Creators
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Bossaerts, Peter
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Plott, Charles
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.
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.Additional details
- Eprint ID
- 44369
- Resolver ID
- CaltechAUTHORS:20140317-152527222
- NSF
- Caltech Laboratory for Experimental Research in Economics and Political Science
- Created
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2014-03-18Created from EPrint's datestamp field
- Updated
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2021-11-10Created from EPrint's last_modified field