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.
Bossaerts, P. and Zame, W.R. (2008), "Risk aversion in laboratory asset markets", Cox, J.C. and Harrison, G.W. (Ed.) Risk Aversion in Experiments (Research in Experimental Economics, Vol. 12), Emerald Group Publishing Limited, Bingley, pp. 341-358. https://doi.org/10.1016/S0193-2306(08)00007-0Download as .RIS
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