Oehler, A., Wedlich, F., Wendt, S., Horn, M., 2021, Does personality drive price bubbles?, Studies in Economics and Finance 38, 619-639.
Abstract
The purpose of this study is to analyze whether differences in market-wide levels of investor personality influence experimental assetmarket outcomes in terms of limit orders, price levels and price bubbles.
Investor personality is determined by a questionnaire. These data
are combined with data from 17 experimental asset markets. Two approaches are used to estimate marketwide levels of investor personality. First, the market-wide average of each personality trait is determined; second, the percentage of individuals with comparable personality in a market is computed. Overall, 364 undergraduate business students participated in the questionnaire and the experimental asset markets.
Limits and transaction prices are higher in markets with higher mean values in participants’ extraversion and openness to experience and lower mean values in participants’ agreeableness and neuroticism. In markets with lower mean values of subjects’ openness to experiences more overpriced transactions are observed. In markets with a higher proportion of extraverted subjects and a lower proportion of neurotic subjects higher limits and transaction prices are observed. Bubble phases last longer in markets with a higher proportion of extraverted and a lower proportion of neurotic subjects.
Overall, the findings suggest that market-wide personality levels influence market outcomes. As a consequence, market-wide levels of personality help to explain prices in auctions with limited number of participants. Additionally, studies that analyze the influence of subjects’ characteristics, including risk aversion, emotional states or overconfidence, on market outcomes should also consider personality traits as potential underlying factor.
Keywords
Behavioural finance, Experimental asset markets, Investor personality, Price bubble
JEL Classifications
G02, G11, C92
Zuvor:
Oehler, A., Wedlich, F., Wendt, S., Horn, M., 2016, Does personality drive price bubbles?; 2016 FMA Annual Meeting, October 19-22, 2016; 30th Annual Meeting of The Academy of Financial Services, October 20-21, 2016; Research in Behavioral Finance Conference 2016, September 15-16; 23rd Annual Conference of the Multinational Finance Society, June 26-29, 2016; 2016 Behavioural Finance Working Group Conference, June 13-14, 2016; 14. HVB-Stiftung Forschungsseminar, June 3-4, 2016; 78. Jahrestagung des Verband der Hochschullehrer für Betriebswirtschaft (VHB), April 18-20, 2016; 52nd Meeting of the Eastern Finance Association (EFA), April 6-9, 2016.
Auch:
Oehler, A., Horn, M., Wendt, S., 2021, Information Illusion? Placebic Information and Stock Price Forecasts; AEA American Economic Association Annual Meeting 2021, January 3-5.
Oehler, A., Horn, M., Wendt, S., 2020, Information Illusion: Placebic Information and Stock Price Estimates; Jahrestagung 2020 Verein für Socialpolitik, September 27-30; 28th Global Conference on Business and Finance, January 6-8.
Oehler, A., Horn, M., Wendt, S., 2019, Information Illusion: Placebic Information and Stock Price Estimates; 2019 Society for Judgment and Decision Making Conference, November 15-18; Psychonomic Society 2019 Annual Meeting, November 14-17; 88th International Atlantic Economic Conference, October 17-20; 2019 Annual Meeting Academy of Financial Services, October 15-16; IAREP/SABE Conference, September 1-4; Behavioural Finance Working Group Conference, June 6-7.
