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'Uncertainty and Asset Prices: Experimental Evidence'

Detail Summary
Date 16 May 2018
Time 16:00 - 17:15


This paper studies the causal effect of uncertainty on asset prices in the laboratory, using a new design that incorporates many characteristics of the real world. In the first treatment, the risk treatment, cash flows to equity follow a known random distribution. In the second, the uncertainty treatment, human managers make production decisions which renders future cash flows uncertain. We find that shareholders require a higher equity premium under the uncertainty treat- ment than under the risk treatment. Asset prices are also more volatile in the Uncertainty treatment. These findings are in line with a stylized model where un- certainty about cash flow’s variance make assets appear subjectively riskier than they are, and where learning generates time-varying expected returns.


Reinhard Selten, Tibor Neugebauer, Julien Penasse

Please contact Anita Kopanyi-Peuker if you have any questions about the lecture.


Room 1.60
Tinbergen Institute Amsterdam
Gustav Mahlerplein 117
1082MS Amsterdam