Pricing Skewed Assets in Multi-Asset Experimental Markets

Shuchen Zhao   Published : October 2025   JEL Code: C90, D53, G10, G40   URL to this Article: https://doi.org/10.1016/j.geb.2025.10.005

Abstract

Using a series of laboratory experiments, this paper examines whether preferences for positively skewed assets, commonly observed in individual decision-making, persist in market settings where assets with both positive and negative skewness coexist. Results from a traditional BDM [Becker et al., 1964] task confirm a strong preference for positively skewed assets. However, this preference does not carry over to continuous double auction (CDA) markets with balanced endowments: market prices equalize, consistent with predictions from the capital asset pricing model (CAPM). More surprisingly, in CDA markets with unbalanced initial endowments, a price inversion arises in which the negatively skewed asset becomes more expensive. Robustness checks across trading formats, group sizes, and asset scopes confirm these patterns. The findings underscore how institutional features and initial endowments moderate the translation of behavioral preferences into market prices, challenging the external validity of individual-level skewness preferences in financial markets.

Keywords

Skewed assets; Asset pricing; Market institutions; Experimental multi-asset markets; Behavioral finance