Risk premia and ambiguity in an experimental market featuring a long-lived asset

John Griffin

Journal of Behavioral and Experimental Finance, 2017, vol. 15, issue C, 21-27

Abstract: This study reports consistent pricing below expected value in a laboratory market featuring a long-lived asset. I posit that this result reflects risk premia. The emergence of statistically significant risk premia appears to stem from the austerity and simplicity of the experimental design, the starkness and centrality of the risk/return relationship within the market environment, attempts to focus subjects’ attention on the risk/reward relationship, and the experience level of the subjects. The proposition that the addition of ambiguity increases expected returns is tested, and no evidence of such a relationship is found.

Keywords: Risk premia; Risk aversion; Ambiguity; Ambiguity aversion (search for similar items in EconPapers)
JEL-codes: C92 D81 G11 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:15:y:2017:i:c:p:21-27

DOI: 10.1016/j.jbef.2017.07.006

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