A culture of greed: Bubble formation in experimental asset markets with greedy and non-greedy traders

Karlijn Hoyer; Stefan Zeisberger; Seger M. Breugelmans; Marcel Zeelenberg

doi:10.1016/j.jebo.2023.05.005

A culture of greed: Bubble formation in experimental asset markets with greedy and non-greedy traders

Karlijn Hoyer
, Stefan Zeisberger^*
, Seger M. Breugelmans
, Marcel Zeelenberg

^*Corresponding author for this work

Marketing

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

This study investigates the relationship between the motive of greed and various asset market indicators, such as trading activity and bubble formation (i.e., mispricing, overpricing, and price amplitude). We ran experimental asset markets that allowed us to measure individuals’ greed in order to create markets populated with greedy individuals and markets with non-greedy individuals. Regarding trading activity, we found that greedier individuals had higher trading activity on the individual level but not on the market level. On the market level, high-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. If our findings translate to actual markets, greed itself might not contribute to asset market bubbles.

Original language	English
Pages (from-to)	32-52
Number of pages	21
Journal	Journal of Economic Behavior and Organization
Volume	212
DOIs	https://doi.org/10.1016/j.jebo.2023.05.005
Publication status	Published - Aug 2023

Bibliographical note

Funding Information:
The authors are thankful to participants of several seminars and conferences for their valuable comments and suggestions: Peter Bossaerts, Sascha Füllbrunn, Michael Razen, Matthias Stefan, Utz Weitzel, Experimental Finance Conference, Radboud University Nijmegen and Tilburg University. We especially thank Utz Weitzel for generously sharing the zTree code of the experimental asset market condition with us.

Publisher Copyright:
© 2023 The Author(s)

Funding

The authors are thankful to participants of several seminars and conferences for their valuable comments and suggestions: Peter Bossaerts, Sascha Füllbrunn, Michael Razen, Matthias Stefan, Utz Weitzel, Experimental Finance Conference, Radboud University Nijmegen and Tilburg University. We especially thank Utz Weitzel for generously sharing the zTree code of the experimental asset market condition with us.

Keywords

Bubbles, Mispricing
Dispositional greed
Experimental asset markets
Experimental finance

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10.1016/j.jebo.2023.05.005

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Cite this

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title = "A culture of greed: Bubble formation in experimental asset markets with greedy and non-greedy traders",

abstract = "This study investigates the relationship between the motive of greed and various asset market indicators, such as trading activity and bubble formation (i.e., mispricing, overpricing, and price amplitude). We ran experimental asset markets that allowed us to measure individuals{\textquoteright} greed in order to create markets populated with greedy individuals and markets with non-greedy individuals. Regarding trading activity, we found that greedier individuals had higher trading activity on the individual level but not on the market level. On the market level, high-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. If our findings translate to actual markets, greed itself might not contribute to asset market bubbles.",

keywords = "Bubbles, Mispricing, Dispositional greed, Experimental asset markets, Experimental finance",

author = "Karlijn Hoyer and Stefan Zeisberger and Breugelmans, \{Seger M.\} and Marcel Zeelenberg",

note = "Funding Information: The authors are thankful to participants of several seminars and conferences for their valuable comments and suggestions: Peter Bossaerts, Sascha F{\"u}llbrunn, Michael Razen, Matthias Stefan, Utz Weitzel, Experimental Finance Conference, Radboud University Nijmegen and Tilburg University. We especially thank Utz Weitzel for generously sharing the zTree code of the experimental asset market condition with us. Publisher Copyright: {\textcopyright} 2023 The Author(s)",

year = "2023",

month = aug,

doi = "10.1016/j.jebo.2023.05.005",

language = "English",

volume = "212",

pages = "32--52",

journal = "Journal of Economic Behavior and Organization",

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AU - Breugelmans, Seger M.

AU - Zeelenberg, Marcel

N1 - Funding Information: The authors are thankful to participants of several seminars and conferences for their valuable comments and suggestions: Peter Bossaerts, Sascha Füllbrunn, Michael Razen, Matthias Stefan, Utz Weitzel, Experimental Finance Conference, Radboud University Nijmegen and Tilburg University. We especially thank Utz Weitzel for generously sharing the zTree code of the experimental asset market condition with us. Publisher Copyright: © 2023 The Author(s)

PY - 2023/8

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N2 - This study investigates the relationship between the motive of greed and various asset market indicators, such as trading activity and bubble formation (i.e., mispricing, overpricing, and price amplitude). We ran experimental asset markets that allowed us to measure individuals’ greed in order to create markets populated with greedy individuals and markets with non-greedy individuals. Regarding trading activity, we found that greedier individuals had higher trading activity on the individual level but not on the market level. On the market level, high-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. If our findings translate to actual markets, greed itself might not contribute to asset market bubbles.

AB - This study investigates the relationship between the motive of greed and various asset market indicators, such as trading activity and bubble formation (i.e., mispricing, overpricing, and price amplitude). We ran experimental asset markets that allowed us to measure individuals’ greed in order to create markets populated with greedy individuals and markets with non-greedy individuals. Regarding trading activity, we found that greedier individuals had higher trading activity on the individual level but not on the market level. On the market level, high-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. If our findings translate to actual markets, greed itself might not contribute to asset market bubbles.

KW - Bubbles, Mispricing

KW - Dispositional greed

KW - Experimental asset markets

KW - Experimental finance

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DO - 10.1016/j.jebo.2023.05.005

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VL - 212

SP - 32

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JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

ER -

A culture of greed: Bubble formation in experimental asset markets with greedy and non-greedy traders

Abstract

Bibliographical note

Funding

Keywords

Access to Document

Persistent URL (handle)

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Cite this