Unleashing animal spirits

Self-control and overpricing in experimental asset markets

Martin G Kocher, Konstantin E Lucks, David Schindler

Research output: Contribution to journalArticleScientificpeer-review

Abstract

One explanation for overpricing on asset markets is a lack of traders’ self-control. We implement the first experiment to address the causal relationship between self-control and systematic overpricing on financial markets. Our setup detects some of the channels through which low individual self-control could transmit into irrational exuberance in markets. Our data indicate a large direct effect of reduced self-control on market overpricing. Low self-control traders report stronger emotions after the market.
Original languageEnglish
Pages (from-to)2149-2178
JournalThe Review of Financial Studies
Volume32
Issue number6
Early online dateSep 2018
DOIs
Publication statusPublished - Jun 2019

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Experimental asset markets
Self-control
Animal spirits
Traders
Emotion
Asset markets
Financial markets
Experiment
Direct effect

Keywords

  • asset pricing
  • trading volume
  • bond interest rates
  • portfolio choice
  • investments decisions
  • expectations
  • speculations
  • financial markets
  • behavioral finance
  • underlying principles

Cite this

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Unleashing animal spirits : Self-control and overpricing in experimental asset markets. / Kocher, Martin G; Lucks, Konstantin E; Schindler, David.

In: The Review of Financial Studies, Vol. 32, No. 6, 06.2019, p. 2149-2178.

Research output: Contribution to journalArticleScientificpeer-review

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