Séminaires de recherche

Competitive Off-equilibrium: theory and experiment

Finance

Intervenant : Peter Bossaerts
The University of Melbourne

8 septembre 2016 - T201 - De 14h00 à 15h15


Competitive Off-equilibrium: Theory and Experiment∗

ELENA ASPAROUHOVA, PETER BOSSAERTS and JOHN LEDYARD

ABSTRACT

We propose a Marshallian model for price and quantity adjustment in parallel continuous double auctions. Investors submit orders only for small quantities, and at prices that maximize the local utility improvements. Pareto optimality, on which equilibrium asset pricing theory is built, is eventually reached. Experiments designed with the CAPM in mind show that, consistent with the theory (i) contrary to the standard Walrasian price adjustment model, price changes cross-autocorrelate with excess demands depending on covariances of liquidating dividends; (ii) a risk-weighted endowment portfolio is closer to mean-variance optimality than the market portfolio; (iii) individual portfolios are under-diversified, and more so when dividend covariances are positive.

JEL Classification: G11, G12, G14

Keywords: Asset pricing theory, Experimental Finance, Walrasian Equilibrium, Local
Marshallian Equilibrium, Price Discovery.

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Contacts  

Département Finance 

Campus HEC Paris
1, rue de la Libération
78351 Jouy-en-Josas cedex
France

Faculté  

Denis GROMB

Finance (GREGHEC)

Voir le CV

4th Annual HEC Paris Workshop Preliminary Program “Banking, Finance, Macroeconomics and the Real Economy”  


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