Sébastien Pouget Professor of Finance


Toulouse School of Economics

IAE Toulouse

University Toulouse 1 Capitole


Economics and Finance Consulting

Inefficiencies may arise in financial markets due to investors’ irrationality, speculative bubbles, information asymmetries and moral hazard. My research studies these inefficiencies by relying on insights and methods from economics, psychology, and history. The objective is to offer potential remedies by improving financial markets’ design, regulatory interventions and socially responsible investments.


I am a Professor of Finance at the IAE of Toulouse (University of Toulouse 1 Capitole) and a member of the Toulouse School of Economics, the Institute for Advanced Studies of Toulouse, and the Institut D’Economie Industrielle (IDEI).

I have been Visiting Professor at New York University - Shanghai (spring 2015), and in the Bendheim Center for Finance, Princeton University (2010-2011), and an Assistant Professor of Finance at the Robinson College of Business, Georgia State University (2002-2005).

My research studies financial markets by relying on insights from management, economics, psychology, and history. I am particularly interested in the experimental methodology. I am in charge of a research center on Socially Responsible Investments, the Chaire Finance Durable et Investissement Responsable, sponsored by around 10 asset management companies and institutional investors, and joint with Ecole Polytechnique in Paris.

I teach courses on behavioral finance and investments. I am currently director of the Master « Financial Markets and Risk Evaluation », Vice-President of the University Toulouse 1 Capitole in charge of Finance, and Director of IDEI.

I have acted as an expert in several U.S. securities class actions and consulted on various financial risk management issues. I have taught numerous courses in various Executive Education Programs.

Last publications

Equilibrium discovery and preopening mechanisms in an experimental market

With Bruno Biais and Christophe Bisière

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Equilibrium discovery and preopening mechanisms in an experimental market

We experimentally analyze equilibrium discovery in i) a pure call auction, ii) a call auction preceded by a non-binding preopening period, and iii) one preceded by a binding preopening period. We consider two sets of parameters: one with a unique equilibrium and low gains from trade, the other with two equilibria, including a high gain from trade equilibrium. We examine whether a preopening period can facilitate coordination on the Pareto dominant equilibrium. The non-binding preopening period offers traders the opportunity to place manipulative orders. After observing such orders, participants learn to distrust cheap talk and coordinate less on Pareto dominant outcomes. In contrast, when preopening orders are binding, they improve the ability to coordinate on high gains from trade. Management Science 60, No. 3 Get paper

The Bubble Game : An Experimental Analysis of Speculation

With Sophie Moinas

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The Bubble Game : An Experimental Analysis of Speculation

We propose a bubble game that involves sequential trading of an asset commonly known to be valueless. Because no trader is ever sure to be last in the market sequence, the game allows for a bubble at the Nash equilibrium when there is no cap on the maximum price. We run experiments both with and without a price cap. Structural estimation of behavioral game theory models suggests that quantal responses and analogy-based expectations are important drivers of speculation. Econometrica 81, N. 4 Get paper

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Working papers

Testing asset pricing theory on six hundred years of stock returns

With David le Bris and Will N. Goetzmann

Testing asset pricing theory on six hundred years of stock returns

Using data on the Bazacle Mills company of Toulouse from 1372 to 1946, we test and cannot reject an asset pricing model with persistent dividends and time-varying risk correction. On the period from 1532 to 1815, the risk correction is correlated with grain prices volatility. Please find below a BBC World interview on the Bazacle company that owes a lot to my co-authors David le Bris and Will Goetzmann and to the book of Germain Sicard, « Aux origines des sociétés anonymes. Les moulins de Toulouse au Moyen Age », Paris, Armand Colin, 1953: Please find below a blog article from Max Nisen at "Quartz.com" and an article in the French newspaper "Le Monde" : MaxNisen - The fascinating 600-year history...

A Mind is a Terrible Thing to Change : Confirmatory Bias in Financial Markets

With Julien Sauvagnat and Stéphane Villeneuve

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A Mind is a Terrible Thing to Change : Confirmatory Bias in Financial Markets

This paper studies the impact of the confirmatory bias on financial markets. Building on Rabin and Schrag (1999), we propose a model in which some traders misinterpret new evidence as confirming their prior beliefs regarding future asset cash flows. The confirmatory bias provides a unified rationale for several stylized facts including excess volatility, excess volume and momentum, and delivers novel predictions : differences of opinion and volume should be larger when past subsequent returns have different signs. Using data on U.S. stocks, we find strong empirical support for these predictions, suggesting that the confirmatory bias is at work in financial markets. Get paper

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