Financial engineering often involves redefining existing financial assets to create new financial products. This paper investigates whether financial engineering can alter the environment so that irrational agents can quickly learn to be rational. The specific environment we investigate is based...

This chapter reports several robustness checks. OJ specifications designed to capture prior beliefs and non-linear responses to news detected some transient effects in many subjects, but for the most part the final regression is indistinguishable from the basic specification presented in this...

Can public information complement private information acquisition? What are the implicationsfor asset market performance? Our paper investigates by constructing a simple bond market in thelaboratory. Human investors observe public information on default probability and then, beforetrading,...