Sabbatical year: research stay at University of California, Santa Barbara and University Jaume I of Castellon


CALL: 2013

DOMAIN: SC - Identities, Diversity and Interaction


LAST NAME: Neugebauer



HOST INSTITUTION: University of Luxembourg

KEYWORDS: Joint research, advances in Experimental Economics, Laboratory Economics, Computational Economics and Finance

START: 2013-09-15



Submitted Abstract

For my research stay at Santa Barbara, I plan to advance on two projects. 1- A direct test of the Modigliani-Miller Theorem of Cooperate Capital Structure, 2- On the effect of Debt Capacity Limitations for the Equity Premium Puzzle. For my research stay at Castellon, advances in two projects are planned. 3- Interest Rate Policy Implications on Price Stability and Participation in Experimental Asset Markets, 4- Experimental Economics meets Computational Finance: Joining Forces towards a Micro Cosmos of the Economy.1- We directly test the Modigliani and Miller theorem of capital structure by stressing the arbitrage argument in the proof of the theorem. We are going to address the question if subjects consistently choose their preferred leverage level when they are able to use homemade leverage. We plan to address this question in an individual choice experiment and in a double-auction market setting.2- The equity premium puzzle (Mehra and Prescott 1985) has recently been accommodated by the assumption of limits on leverage. The project addresses this issue with a laboratory study.3- In a recent project (Selten and Neugebauer 2012), we have introduced an experimental economics design to study the behavior of financial markets in the laboratory. The proposed project uses this design to investigate various effects of interest-rate policy. Among other questions, the following questions are addressed in the study: How does the interest rate affect speculative behavior and asset prices; what is the effect of interest-rates hikes on asset market participation and stability of markets?4- The purpose of the proposed study is to embed the financial market setting of Selten and Neugebauer (2012) in the overall economy with sectors for consumption and labor. The objective is the development of an interlinked economy in the laboratory. Uncertainty in the envisaged laboratory environment should be completely endogenous, without requirement of chance events. The objective is scientifically addressed with repeated adjustments by means of an interaction of experimental and computational finance.

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