IDEAS home Printed from https://ideas.repec.org/a/eee/joepsy/v37y2013icp34-41.html
   My bibliography  Save this article

Not all financial speculation is treated equally: Laypeople’s moral judgments about speculative short selling

Author

Listed:
  • Lotz, Sebastian
  • Fix, Andrea R.

Abstract

Since the recent financial crisis, regulators and the general public have focused on financial speculation as one of its potential causes. In addition to the roles played by rating agencies and complicated financial engineering, speculative short sales have been put into question. However, laypeople’s moral judgments about this type of financial speculation have rarely been investigated in economic psychology. The present study aims to fill this gap. Across four studies, we find that laypeople’s moral judgments of short selling are significantly harsher than their judgments of long positions. Both successful (Study 1) and unsuccessful (Study 2) short selling receives harsher moral judgments. In addition, studies which manipulate the moral character of the shorted asset (Study 3) or the time horizon of the investment strategy (Study 4) support the conclusion that short selling is considered less moral than taking a similar long position. The results present consistent support for a judgment bias of economic laypeople in the domain of financial economics.

Suggested Citation

  • Lotz, Sebastian & Fix, Andrea R., 2013. "Not all financial speculation is treated equally: Laypeople’s moral judgments about speculative short selling," Journal of Economic Psychology, Elsevier, vol. 37(C), pages 34-41.
    • Handle: RePEc:eee:joepsy:v:37:y:2013:i:c:p:34-41
    DOI: 10.1016/j.joep.2013.05.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167487013000603
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.joep.2013.05.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Christandl, Fabian & Fetchenhauer, Detlef, 2009. "How laypeople and experts misperceive the effect of economic growth," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 381-392, June.
    2. Baron, Jonathan & Kemp, Simon, 2004. "Support for trade restrictions, attitudes, and understanding of comparative advantage," Journal of Economic Psychology, Elsevier, vol. 25(5), pages 565-580, October.
    3. Kemp, Simon, 2007. "Psychology and opposition to free trade," World Trade Review, Cambridge University Press, vol. 6(1), pages 25-44, March.
    4. Haferkamp, Alexandra & Fetchenhauer, Detlef & Belschak, Frank & Enste, Dominik, 2009. "Efficiency versus fairness: The evaluation of labor market policies by economists and laypeople," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 527-539, August.
    5. Gangl, Katharina & Kastlunger, Barbara & Kirchler, Erich & Voracek, Martin, 2012. "Confidence in the economy in times of crisis: Social representations of experts and laypeople," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(5), pages 603-614.
    6. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    7. Dominik H. Enste & Alexandra Haferkamp & Detlef Fetchenhauer, 2009. "Unterschiede im Denken zwischen Ökonomen und Laien – Erklärungsansätze zur Verbesserung der wirtschaftspolitischen Beratung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(1), pages 60-78, February.
    8. Jacob, Robert & Christandl, Fabian & Fetchenhauer, Detlef, 2011. "Economic experts or laypeople? How teachers and journalists judge trade and immigration policies," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 662-671.
    9. repec:cup:judgdm:v:3:y:2008:i::p:335-343 is not listed on IDEAS
    10. Alston, Richard M & Kearl, J R & Vaughan, Michael B, 1992. "Is There a Consensus among Economists in the 1990's?," American Economic Review, American Economic Association, vol. 82(2), pages 203-209, May.
    11. Cletus C. Coughlin, 2002. "The controversy over free trade: the gap between economists and the general public," Review, Federal Reserve Bank of St. Louis, vol. 84(Jan.), pages 1-22.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stimel, Derek & Sekerka, Leslie E., 2018. "Play fair! Innovating internal self-regulation in the market for profit," Business Horizons, Elsevier, vol. 61(1), pages 115-124.
    2. Chatterjee, Subimal & Dalman, M. Deniz & Mookherjee, Satadruta, 2020. "To short or not to short? Improving morality judgments of short trades and short traders," Journal of Business Research, Elsevier, vol. 114(C), pages 173-185.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacob, Robert & Christandl, Fabian & Fetchenhauer, Detlef, 2011. "Economic experts or laypeople? How teachers and journalists judge trade and immigration policies," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 662-671.
    2. Johnny Runge & Nathan Hudson-Sharp, 2020. "Public Understanding of Economics and Economic Statistics," Economic Statistics Centre of Excellence (ESCoE) Occasional Papers ESCOE-OP-03, Economic Statistics Centre of Excellence (ESCoE).
    3. Haferkamp, Alexandra & Fetchenhauer, Detlef & Belschak, Frank & Enste, Dominik, 2009. "Efficiency versus fairness: The evaluation of labor market policies by economists and laypeople," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 527-539, August.
    4. Dominik H. Enste & Alexandra Haferkamp & Detlef Fetchenhauer, 2009. "Unterschiede im Denken zwischen Ökonomen und Laien – Erklärungsansätze zur Verbesserung der wirtschaftspolitischen Beratung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(1), pages 60-78, February.
    5. Nguyen, Quynh, 2015. "“Mind the Gap”: Inequality Aversion and Mass Support for Protectionism," Papers 838, World Trade Institute.
    6. Simon Kemp, 2008. "Lay attitudes to trade with low-wage countries," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 335-343, April.
    7. Johnson, Samuel G. B., 2019. "Toward a cognitive science of markets: Economic agents as sense-makers," Economics Discussion Papers 2019-10, Kiel Institute for the World Economy (IfW Kiel).
    8. repec:cup:judgdm:v:3:y:2008:i::p:335-343 is not listed on IDEAS
    9. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    10. Johnson, Samuel G. B., 2019. "Toward a cognitive science of markets: Economic agents as sense-makers," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-29.
    11. Müller, Andrea & Haucap, Justus, 2014. "Why are Economists so Different? Nature, Nurture and Gender Effects in a Simple Trust Game," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100554, Verein für Socialpolitik / German Economic Association.
    12. Potrafke, Niklas, 2013. "Minority positions in the German Council of Economic Experts: A political economic analysis," European Journal of Political Economy, Elsevier, vol. 31(C), pages 180-187.
    13. Isabel Busom & Cristina Lopez-Mayan & Judith Panadés, 2017. "Students' persistent preconceptions and learning economic principles," The Journal of Economic Education, Taylor & Francis Journals, vol. 48(2), pages 74-92, April.
    14. Isabel Busom Piquer & Cristina López-Mayán Navarrete, 2015. "Student preconceptions and learning economic reasoning," Working Papers wpdea1508, Department of Applied Economics at Universitat Autonoma of Barcelona.
    15. Chatterjee, Subimal & Dalman, M. Deniz & Mookherjee, Satadruta, 2020. "To short or not to short? Improving morality judgments of short trades and short traders," Journal of Business Research, Elsevier, vol. 114(C), pages 173-185.
    16. Daniel Müller & Elisabeth Gsottbauer, 2021. "Why Do People Demand Rent Control?," Working Papers 2021-20, Faculty of Economics and Statistics, Universität Innsbruck.
    17. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
    18. Jonathan Baron, 2012. "The ‘culture of honor’ in citizens’ concepts of their duty as voters," Rationality and Society, , vol. 24(1), pages 37-72, February.
    19. Christandl, Fabian & Fetchenhauer, Detlef & Hoelzl, Erik, 2011. "Price perception and confirmation bias in the context of a VAT increase," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 131-141, February.
    20. Stiftung Familienunternehmen (ed.), 2012. "Der Weg zu einer "Agenda 2030": Reformen zwischen objektiver Notwendigkeit und individueller Verweigerung," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 110562.
    21. Silvia Blum & Till van Treeck, 2019. "Ordoliberalism: The Next Generation. What Do Prospective Social Science Teachers in Germany Think About the Euro Crisis?," Journal of Common Market Studies, Wiley Blackwell, vol. 57(4), pages 787-804, July.

    More about this item

    Keywords

    Moral judgments; Financial speculation; Laypeople; Heuristics and biases;
    All these keywords.

    JEL classification:

    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:37:y:2013:i:c:p:34-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/joep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.