Experimental evidence on varying uncertainty and skewness in laboratory double-auction markets

Jürgen Huber, Michael Kirchler and Matthias Stefan

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PB, 798-809

Abstract: We investigate the influence of skewness in asset fundamentals on asset prices under different states of uncertainty in double-auction markets. Three different types of assets are considered: risky assets, ambiguous assets and assets where the fundamental value distribution can be learned by repeated sampling of realizations. We show that market prices for skewed assets initially differ from those of non-skewed assets for risky as well as for ambiguous assets. Because of learning, the difference in market prices mostly disappears towards the end of trading. When fundamentals are “learned” by experience sampling, prices of all assets, irrespective of skewness, are very efficient from the beginning. Thus, when probabilities are not described but experienced, subjects are better able to estimate the fundamental value of an asset.

Keywords: Experimental finance; Skewness; Ambiguity; Risk; Experience sampling; Market efficiency (search for similar items in EconPapers)
JEL-codes: C91 D81 G11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pb:p:798-809

DOI: 10.1016/j.jebo.2014.04.004

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