IDEAS home Printed from https://ideas.repec.org/a/taf/hbhfxx/v25y2024i2p167-180.html
   My bibliography  Save this article

An Experimental Study of the Effect of the Anchor of the Option's Underlying Asset on Investors’ Pricing Decisions

Author

Listed:
  • Naveh Eskinazi
  • Miki Malul
  • Mosi Rosenboim
  • Tal Shavit

Abstract

The current study tests experimentally whether decision makers' options pricing is biased by the magnitude of the option's underlying asset outcomes in what is called an anchor effect. We recruited 1,023 participants through Amazon’s Mechanical Turk platform (MTurk) and assigned them randomly to eight groups that differed by type of asset and pricing position (buy or sell). Participants were asked to price a lottery, meaning, the option, whose outcomes are derived from an underlying lottery with a high, low or non-numerical possible outcome. The results indicate that the underlying asset's magnitude (low or high) creates an anchor that affects the option’s pricing. However, the option's pricing is not affected by framing it as a derivative lottery. To the best of our knowledge, this is the first study that examines whether the underlying asset creates an anchor that affects an option’s pricing.

Suggested Citation

  • Naveh Eskinazi & Miki Malul & Mosi Rosenboim & Tal Shavit, 2024. "An Experimental Study of the Effect of the Anchor of the Option's Underlying Asset on Investors’ Pricing Decisions," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 25(2), pages 167-180, April.
  • Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:167-180
    DOI: 10.1080/15427560.2022.2100377
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15427560.2022.2100377
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/15427560.2022.2100377?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.

    More about this item

    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:taf:hbhfxx:v:25:y:2024:i:2:p:167-180. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/hbhf .

    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.