Recently, a paper authored by Associate Professor Zhao Shuchen from the Institute for Advanced Economic Research (IAER) at Dongbei University of Finance and Economics (DUFE) has been accepted and published online in the prestigious economics journal Games and Economic Behavior. Entitled “Pricing skewed assets in multi-Asset experimental markets”, the study investigates whether individual preferences for positively skewed assets, widely documented in behavioral finance, persist and influence prices in market settings where assets with both positive and negative skewness coexist.

Using a combination of BDM and continuous double auction (CDA) market experiments, the study finds that while individuals strongly prefer positively skewed assets in isolated decision-making, this preference disappears in markets with balanced endowments, where prices converge in line with the Capital Asset Pricing Model (CAPM). Surprisingly, when initial endowments are unbalanced, a price inversion emerges, with negatively skewed assets becoming more expensive. Robustness checks across trading formats, group sizes, and asset scopes confirm the persistence of this pattern.

The findings highlight how institutional structures and initial endowments critically mediate the translation of behavioral preferences into market outcomes. This research contributes to experimental evidence relevant to real-world financial markets.

Written by: Zhao Shuchen, Wang Jie

Source: Institute for Advanced Economic Research