Emotional state and Market Behavior

A. Breaban, C.N. Noussair

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: We consider the relationship between the emotional state of traders and market prices. We create asset markets with the structure first studied by Smith, Suchanek and Williams (1988), which is known to generate price bubbles and crashes. We analyze participants' facial expressions with facereading software before and while the market is operating. We find that greater positive emotion in facial expressions before the market opens predicts higher prices and larger bubbles. Greater fear predicts lower prices and smaller bubbles. Those traders who remain the most neutral during periods of market volatility achieve the highest earnings. Loss aversion in decision making is correlated with fear, not with other emotions.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages34
Volume2013-031
Publication statusPublished - 2013

Publication series

NameCentER Discussion Paper
Volume2013-031

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Traders
Bubble
Emotion
Market behavior
Crash
Price bubbles
Positive emotions
Loss aversion
Market volatility
Asset markets
Software
Decision making
Market price

Keywords

  • bubble
  • emotions
  • facereading
  • fear
  • crash.

Cite this

Breaban, A., & Noussair, C. N. (2013). Emotional state and Market Behavior. (CentER Discussion Paper; Vol. 2013-031). Tilburg: Economics.
Breaban, A. ; Noussair, C.N. / Emotional state and Market Behavior. Tilburg : Economics, 2013. (CentER Discussion Paper).
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Breaban, A & Noussair, CN 2013 'Emotional state and Market Behavior' CentER Discussion Paper, vol. 2013-031, Economics, Tilburg.

Emotional state and Market Behavior. / Breaban, A.; Noussair, C.N.

Tilburg : Economics, 2013. (CentER Discussion Paper; Vol. 2013-031).

Research output: Working paperDiscussion paperOther research output

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PB - Economics

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Breaban A, Noussair CN. Emotional state and Market Behavior. Tilburg: Economics. 2013. (CentER Discussion Paper).