Basic Principles Of Asset Pricing Theory : Evidence From Large-Scale Experimental Financial Markets

@inproceedings{Bossaerts1999BasicPO,
  title={Basic Principles Of Asset Pricing Theory : Evidence From Large-Scale Experimental Financial Markets},
  author={Peter Bossaerts and Charles R. Plott},
  year={1999}
}
We report on six large-scale financial markets experiments that were designed to test two of the most basic propositions of modern asset pricing theory, namely, that the interaction between risk averse agents in a competitive market leads to equilibration, and that, in equilibrium, risk premia are solely determined by covariance with aggregate risk. We designed the experiments within the framework suggested by two theoretical models, namely, Arrow and Debreu’s complete-markets model, and the… CONTINUE READING