House money effects in experimental asset markets

Debapriya Jojo Paul, Julia Henker, Sian Owen

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

Abstract

We investigate whether prices in experimental asset markets behave differently when participants are required to trade over earned wealth compared to unearned wealth.The latter describes the standard practice of endowing participants with cash/assets in experimental asset market studies of bubbles, which may elicit greater-than-normal risk-seeking behaviour, thereby confounding attempts to understand their drivers ormitigators. We take a new methodological approach in the vein of Cherry et al (2002)in seeking to answer this question by requiring participants in one treatment to earn their initial market allocation. We find that bubbles/mispricing occurs with similar frequency, severity, and duration whether trade occurs with earned or unearned wealth. Our results indicate that any confounding effect(s) caused by endowed money in past studies of bubbles is minimal. Consequently, existing methodology in the study of bubbles does not require modification.
Original languageEnglish
Title of host publicationProceedings of the Behavioural Finance and Capital Markets Conference
EditorsP Kalev
Place of PublicationAdelaide
PublisherUniversity of South Australia
Publication statusPublished - 2013
EventBehavioural Finance and Capital Markets Conference - Rockford Hotel, Adelaide, Australia
Duration: 1 Aug 20132 Aug 2013
http://www.unisa.edu.au/research/cafs/events/conferences/

Conference

ConferenceBehavioural Finance and Capital Markets Conference
CountryAustralia
CityAdelaide
Period1/08/132/08/13
Internet address

Fingerprint

Bubble
Experimental asset markets
Wealth
Confounding
Mispricing
Methodology
Risk seeking
Assets
Severity
Cash

Cite this

Paul, D. J., Henker, J., & Owen, S. (2013). House money effects in experimental asset markets. In P. Kalev (Ed.), Proceedings of the Behavioural Finance and Capital Markets Conference Adelaide: University of South Australia.
Paul, Debapriya Jojo ; Henker, Julia ; Owen, Sian. / House money effects in experimental asset markets. Proceedings of the Behavioural Finance and Capital Markets Conference. editor / P Kalev. Adelaide : University of South Australia, 2013.
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Paul, DJ, Henker, J & Owen, S 2013, House money effects in experimental asset markets. in P Kalev (ed.), Proceedings of the Behavioural Finance and Capital Markets Conference. University of South Australia, Adelaide, Behavioural Finance and Capital Markets Conference, Adelaide, Australia, 1/08/13.

House money effects in experimental asset markets. / Paul, Debapriya Jojo; Henker, Julia; Owen, Sian.

Proceedings of the Behavioural Finance and Capital Markets Conference. ed. / P Kalev. Adelaide : University of South Australia, 2013.

Research output: Chapter in Book/Report/Conference proceedingConference contributionResearchpeer-review

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Paul DJ, Henker J, Owen S. House money effects in experimental asset markets. In Kalev P, editor, Proceedings of the Behavioural Finance and Capital Markets Conference. Adelaide: University of South Australia. 2013