Countercyclical risk aversion in experimental asset markets

This research is an experimental investigation into the changing nature of individual and collective risk aversion during financial decision making. In experimental asset markets the market mechanism results in an overly optimistic view of the value of an asset if a business cycle expansion is perceived, while the reverse is true in the business cycle contraction. Theses empirical findings provide a behavioural basis for theoretical models of asset pricing which contain a time varying risk aversion factor and add to the literature which attempts to explain the asset premium puzzle