Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145366
Authors: 
Weber, Matthias
Duffy, John
Schram, Arthur
Year of Publication: 
2016
Series/Report no.: 
Tinbergen Institute Discussion Paper 16-059/I
Abstract: 
An important feature of bond markets is the relationship between initial public offering prices and the probability of the issuer defaulting. First, this probability affects the bond prices. Second, IPO prices determine the default probability. Though market equilibrium has been shown to predict well for other assets, it is a priori unclear whether markets will yield competitive prices when such interaction with the default probability occurs. We develop a flexible bond market model that is easily implemented in the laboratory and examine how subjects price bonds. We find that subjects learn to price bonds well after only a few repetitions.
Subjects: 
bond markets
experimental finance
experimental markets
asset pricing
learning
JEL: 
C92
C90
D47
G12
Document Type: 
Working Paper

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