Emotions and chat in a financial markets experiment
AbstractThis paper examines experimentally two common conjectures in the popular literature on financial markets: that they are swayed by emotion and that they behave like a 'crowd'. We find consistent evidence that deviations of prices from fundamental value depend on the emotion of excitement and on the presence of independently identified â€˜irrationalâ€™ traders. Other than through 'irrational' traders, there is no evidence, however, that non-price communication ('chat') influences prices. Subjects with an economics background make better traders.
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Bibliographic InfoPaper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 11-11.
Date of creation: 01 Mar 2011
Date of revision:
Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
Other versions of this item:
- Shaun P. Hargreaves Heap & Daniel John Zizzo, 2011. "Emotions and Chat in a Financial Markets Experiment," Working Paper Series 10, The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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