Stocks as Lotteries? An Experimental Test of Expected Utility versus Behavioral Models

Brice Corgnet (), Yao Thibaut Kpegli and Jacopo Magnani
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Brice Corgnet: EM - EMLyon Business School
Yao Thibaut Kpegli: TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique
Jacopo Magnani: NTNU - Norwegian University of Science and Technology [Trondheim] - NTNU - Norwegian University of Science and Technology = Norges Teknisk-Naturvitenskapelige Universitet = Norjan teknis-luonnontieteellinen yliopisto

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Abstract: Our study provides the first causal test of classical and behavioral asset pricing models that incorporate skewness pricing. In line with these models, our experimental markets show that skewness is systematically priced. Our findings also reveal that positively skewed assets available in small supply exhibit negative expected returns, which is consistent with prospect theory, but not with expected utility models. Furthermore, in line with the mechanism underlying prospect theory, we show that the negative returns of the positively skewed asset are most pronounced during market sessions where traders overweight the low probability of receiving a large payoff.

Date: 2026-07-30
New Economics Papers: this item is included in nep-upt
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Published in Review of Financial Studies, 2026, ⟨10.1093/rfs/hhag070⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05740177

DOI: 10.1093/rfs/hhag070

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