EconPapers    
Economics at your fingertips  
 

Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence

Jürgen Huber (), Stefan Palan () and Stefan Zeisberger ()
Additional contact information
Jürgen Huber: Department of Banking and Finance, University of Innsbruck
Stefan Zeisberger: Institute for Management Research, Radboud University Nijmegen

No 2017-05, Working Paper Series, Social and Economic Sciences from Faculty of Social and Economic Sciences, Karl-Franzens-University Graz

Abstract: What people perceive as risk clearly goes beyond variance. Several papers have shown that, e.g., probability of loss plays a more prominent role in perceived risk than does variance. We are the first to explore how individual risk perception influences prices and trading behavior in a market setting by exposing subjects to a number of differently shaped return distributions which they then trade on. We first elicit subjects' individual risk perceptions, finding results in line with earlier papers. We then let subjects trade assets with these return distributions on a continuous double auction market. In the markets we observe active trading and prices strongly driven by average risk perception. While standard finance theory predicts identical prices for most of our assets we find average prices to vary by up to 20 percent, with assets perceived as being less risky trading at significantly higher prices.

Pages: 39 pages
Date: 2017-07-24
New Economics Papers: this item is included in nep-exp and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://static.uni-graz.at/fileadmin/sowi/Working_ ... Palan_Zeisberger.pdf First version, 2017 (application/pdf)

Related works:
Journal Article: Does investor risk perception drive asset prices in markets? Experimental evidence (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:grz:wpsses:2017-05

Access Statistics for this paper

More papers in Working Paper Series, Social and Economic Sciences from Faculty of Social and Economic Sciences, Karl-Franzens-University Graz Contact information at EDIRC.
Bibliographic data for series maintained by Editorial team ().

 
Page updated 2021-04-11
Handle: RePEc:grz:wpsses:2017-05