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

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  • Griffin, John

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.

Suggested Citation

  • Griffin, John, 2017. "Risk premia and ambiguity in an experimental market featuring a long-lived asset," Journal of Behavioral and Experimental Finance, Elsevier, vol. 15(C), pages 21-27.
    • Handle: RePEc:eee:beexfi:v:15:y:2017:i:c:p:21-27
    DOI: 10.1016/j.jbef.2017.07.006
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    More about this item

    Keywords

    Risk premia; Risk aversion; Ambiguity; Ambiguity aversion;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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