• Graduate program
  • Research
  • News
  • Events
    • Summer School
      • Climate Change
      • Gender in Society
      • Inequalities in Health and Healthcare
      • Business Data Science Summer School Program
      • Receive updates
    • Events Calendar
    • Events Archive
    • Tinbergen Institute Lectures
    • Conference: Consumer Search and Markets
    • Annual Tinbergen Institute Conference
  • Summer School
    • Climate Change
    • Gender in Society
    • Inequalities in Health and Healthcare
    • Business Data Science Summer School Program
    • Receive updates
  • Alumni
  • Magazine

Weber, M., Duffy, J. and Schram, A. (2018). An Experimental Study of Bond Market Pricing The Journal of Finance, 73(4):1857--1892.

  • Affiliated authors
    Arthur Schram, Matthias Weber
  • Publication year
    2018
  • Journal
    The Journal of Finance
View publication

An important feature of bond markets is the relationship between the initial public offering (IPO) price and the probability that the issuer defaults. On the one hand, the default probability affects the IPO price; on the other hand, the IPO price affects the default probability. It is a priori unclear whether agents can competitively price such assets. Our paper is the first to explore this question. To do so, we use laboratory experiments. We develop two flexible bond market models that are easily implemented in the laboratory. We find that subjects learn to price the bonds well after only a few repetitions.