Journal article

RISK AVERSION IN LABORATORY ASSET MARKETS

Peter Bossaerts, William R Zame, JC Cox (ed.), GW Harrison (ed.)

Research in Experimental Economics | EMERALD GROUP PUBLISHING LIMITED | Published : 2008

Abstract

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. Copyright © 2008 by Emerald Group Publishing Limited.

University of Melbourne Researchers