Essays on Behavioral Economics: Wedding Gift Exchange and Asset Pricing under Risk

This thesis contributes to economic research in two sub-fields of behavioral economics: asset pricing under risk and gift-exchange. The first essay, "Risk, Information and Asset Pricing: An Experiment," investigates how providing non-fundamental information in experimental asset market affects market pricing process. The information points to potential arbitrage opportunity in the market if market prices are different from the intrinsic values, which is expected to speed up market price convergence to intrinsic values. In contrast, persistent under-pricing is observed in all experimental sessions. Providing non-fundamental information introduces price rigidity that disrupts the information diffusion process. As a result, share prices are anchored around levels that reflect different market appetite towards risk in different experimental sessions. The second essay, "Giving According to The Rules: A Study of Monetary Gift Exchange in China," explores the features of the social institution of monetary gift exchange for Chinese weddings using a survey study. Results show that the size of giving depends on the nature and quality of relationship, and gift history. The size of gift as a proportion of average social disposable income tends to decrease over time, which implies that monetary gift exchange does not intensify the status competition. Monetary gift exchange also tends to maintain the balance of giving as the size of return gifts as a proportion of average city-wise disposable income is often similar to the size of initial gifts received in the past. Keywords: behavioral economics, risk, information, asset pricing, experiment; monetary gift exchange, reciprocity, social norms, status competition