A Culture of Greed: The Effect of Aggregate Greed on Bubble Formation in Experimental Asset Markets

2021 ◽  
Author(s):  
Karlijn Hoyer ◽  
Stefan Zeisberger ◽  
Marcel Zeelenberg ◽  
Seger Breugelmans
Keyword(s):  
Bubble Formation ◽  
Asset Markets ◽  
Experimental Asset Markets

scholarly journals The Effect of Earned Versus House Money on Price Bubble Formation in Experimental Asset Markets*

2014 ◽  
Vol 19 (4) ◽  
pp. 1455-1488 ◽  
Author(s):  
Brice Corgnet ◽  
Roberto Hernán-González ◽  
Praveen Kujal ◽  
David Porter
Keyword(s):  
Bubble Formation ◽  
Asset Markets ◽  
Price Bubble ◽  
Experimental Asset Markets

scholarly journals Misinformation About Dividend Payouts Influences Transaction Prices in Experimental Asset Markets

e-Finanse ◽  
2019 ◽  
Vol 15 (4) ◽  
pp. 44-54
Author(s):  
Mateusz Polak ◽  
Romuald Polczyk
Keyword(s):  
Asset Pricing ◽  
Value Function ◽  
Bubble Formation ◽  
Asset Markets ◽  
Double Auction ◽  
Experimental Markets ◽  
Transaction Prices ◽  
Correct Information ◽  
Investment Returns ◽  
Experimental Asset Markets

AbstractAIMS: The paper investigates the effects of misinformation regarding dividend payouts on bubble formation, asset pricing and individual investment returns in experimental asset markets, when correct information about the expected dividends and their probabilities is also available.METHOD: In two experiments, totaling34 Smith-Suchanek-Williams type double-auction continuous experimental markets (238 subjects), participants were exposed to misinformation regarding dividend payouts in a previous game, with the correct dividend matrix also provided. The misinformation stated the dividends in the previous game to have been much lower or much higher than according to the expected value function. The misinformation was either homogenous for all participants or provided to only half of the investors in a market (heterogeneously).RESULTS:Homogenous misinformation stating that the last game’s dividend payouts were high, led to larger overpricing throughout the game, as compared to baseline (no misinformation) and homogenous misinformation stating that the last game’s dividends were low. In informationally heterogeneous markets, where half of the participants received “high dividends” misinformation and half remained non-misinformed, transaction prices were the lowest compared to the aforementioned treatments. It was also discovered that agents receiving the ‘high dividend’ misinformation had lower returns than non-misinformed participants in the same heterogeneous market.

The Effect of Misstatements on Decisions of Financial Statement Users: An Experimental Investigation of Auditor Materiality Thresholds

2002 ◽  
Vol 21 (1) ◽  
pp. 11-27 ◽  
Author(s):  
Brad Tuttle ◽  
Maribeth Coller ◽  
R. David Plumlee
Keyword(s):  
Economic Condition ◽  
Accounting Information ◽  
Critical Factor ◽  
Financial Statement ◽  
Asset Markets ◽  
Market Prices ◽  
Financial Misstatements ◽  
Experimental Asset Markets ◽  
Financial Misstatement ◽  
Materiality Thresholds

Auditors are faced with the dilemma of inferring materiality based, in part, on whether a given level of financial misstatement will affect the decisions of statement users. Misstatements in accounting information that are below the materiality threshold are not expected to change users' assessments of a company's economic condition. While the auditing profession accepts materiality in concept, its application in practice is more controversial. In certain settings, the nature of a misstatement, such as changing a small profit into a loss, may affect an auditor's materiality judgment. However, in many cases the magnitude of the misstatement is a critical factor in judging materiality. We focus solely on the issue of magnitude and examine whether financial misstatements that are at or below commonly applied materiality thresholds result in market prices that differ from those resulting from correctly stated information. We conduct a series of 12 experimental asset markets each consisting of 12 independent three-minute trading periods with six traders in each market. We then compare prices for companies generated by markets that are provided either correctly stated information, information containing misstatements that would typically be considered immaterial, or information containing material misstatements. Results indicate that undisclosed misstatements within materiality thresholds that are consistent with current audit practice do not affect market prices, while misstatements well above these thresholds do.

scholarly journals Do option-like incentives induce overvaluation? Evidence from experimental asset markets

2014 ◽  
Vol 40 ◽  
pp. 179-194 ◽  
Author(s):  
Martin Holmen ◽  
Michael Kirchler ◽  
Daniel Kleinlercher
Keyword(s):  
Asset Markets ◽  
Experimental Asset Markets
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