Risk aversion in laboratory asset markets

Peter Bossaerts and William R. Zame

A chapter in Risk Aversion in Experiments, 2008, pp 341-358 from Emerald Group Publishing Limited

Abstract: This paper reports findings from a series of laboratory asset markets. Although stakes in these markets are modest, asset prices display a substantial equity premium (risky assets are priced substantially below their expected payoffs) – indicating substantial risk aversion. Moreover, the differences between expected asset payoffs and asset prices are in the direction predicted by standard asset-pricing theory: assets with higher beta have higher returns. This work suggests ways to separate the effects of risk aversion from competing explanations in other experimental environments.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rexezz:s0193-2306(08)00007-0

DOI: 10.1016/S0193-2306(08)00007-0

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