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 language | English |
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Pages (from-to) | 2149-2178 |
Journal | The Review of Financial Studies |
Volume | 32 |
Issue number | 6 |
Early online date | Sep 2018 |
DOIs | |
Publication status | Published - Jun 2019 |
Keywords
- asset pricing
- trading volume
- bond interest rates
- portfolio choice
- investments decisions
- expectations
- speculations
- financial markets
- behavioral finance
- underlying principles