Kocher, Martin (University of Vienna)
Lucks, Konstantin (LMU Munich)
Schindler, David (Tilburg University)
One explanation for overpricing on asset markets is a lack of traders’ self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and systematic overpricing on financial markets. Our setup can detect some of the channels through which individual self-control restrictions could transmit into irrational exuberance in markets. Our data indicate a large direct effect of restricted self-control abilities on market overpricing. Low self-control traders report stronger emotions after the market.
behavioral finance; trader behavior; self-control; experimental asset markets; overpricing
G02; G11; G12; D53; D84