Owners tend to overvalue possessions relative to non‐owners: a phenomenon known as the endowment effect. In three experiments, using markets for goods of uncertain value, we investigated whether this can be partly attributed to misperceiving an asset's profitability or to uncertainty about a good's utility. To test our hypotheses, we devised the Balloon Endowment Risk Task, in which participants can sell or buy their right to participate in the Balloon Analogue Risk Task. Once purchased/retained, a virtual balloon is pumped to accrue money, which is lost if the balloon bursts. Participants first learn about the risky asset (balloon) by observing others playing the Balloon Analogue Risk Task before they enter the market. In Experiment 1, we replicated the endowment effect; yet, owners and non‐owners predicted pumping the same number of times and subsequently did so when given that opportunity. In Experiments 2 and 3, the level of uncertainty about the balloon's profitability was manipulated by modifying the number of bursts that participants viewed in the initial learning stage. When more diagnostic information was provided, making the average burst point easier to estimate and reducing value uncertainty and increasing confidence in valuation, the endowment effect diminished although mean estimates of the average burst point did not differ between owners and non‐owners. Thus, endowment effects were partly attributable to value uncertainty but could not be explained by owners and non‐owners having divergent perceptions of the asset's payoff distribution. Copyright © 2014 John Wiley & Sons, Ltd.