Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: May, 2023, Volume 14, Issue 2

Risk Aversion and Information Aggregation in Binary-Asset Markets

p. 753-798

Antonio Filippin, Marco Mantovani

We investigate how risk aversion (RA) shapes the informative content of prices in an experimental asset market, where traders are sorted according to their RA. RA should induce steeper individual demands and, under its most common parametrizations, drive equilibrium prices closer to revealing the state. Results support the prediction on individual demands, but not the prediction on prices, which do not vary with RA and are close to the risk‐neutral benchmark. This purported conflict is due to traders, particularly the more risk‐averse ones, conveying into prices only part of their information.

Full Content: Print

Supplemental Material

Supplement to "Risk Aversion and Information Aggregation in Binary-Asset Markets"

Antonio Filippin and Marco Mantovani

Journal News