We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market’s fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction...

We show that differences in market participants risk aversion can generate herd behavior in stock markets where assets are traded sequentially. This in turn prevents learning of market's fundamentals. These results are obtained without introducing multidimensional uncertainty or transaction...

We report results of a series of experiments that simulates trading in financial market. The specific format of our experiment allows to unambiguously measure the information content of the order flow and to disentangle the impact that risk attitudes and belief updating rules have on market...

This paper presents a model of trading in unique durable assets that provide idiosyncratic payoffs, such as art, luxury real estate, and firm subsidiaries. Agents make purchase and sale decisions in an auction market based on their private use value of the asset and on the expected resale...

Merton (1974) analysed the risk structure of corporate bonds under the assumption of a flat term structure of interest rates. We clarify his results and extend them to the case of stochastic interest rates. As a consequence we deal simultaneously with interest rate risk and with default risk. We...