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The impact of different incentive schemes on asset prices

Kleinlercher, D. (författare)
Huber, J. (författare)
Kirchler, Michael, 1977- (författare)
Göteborgs universitet, Centrum för finans, Gothenburg University, Centre for Finance
Göteborgs universitet Handelshögskolan. Centrum för finans. 
2014
Engelska.
Ingår i: European Economic Review. - 0014-2921. ; 68, s. 137-150
  • Tidskriftsartikel (refereegranskat)
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  • How people are incentivized is one of the main drivers of how they behave. In laboratory asset markets we evaluate the impact of four trader incentive bonus, bonus with cap, linear, and penalty - on asset prices and trader behavior. We find that (i) an asset with identical expected dividend shows price levels which differ by more than 100 percent depending on the incentive scheme subjects face. In particular, prices of markets populated by subjects with bonus incentives show the highest prices, whereas those with penalty-like incentivized subjects exhibit the lowest. (ii) However, subjects act approximately rational as different incentives generate different optimal price levels. (iii) In markets where different subjects have different incentive schemes we find that those with bonus incentives exhibit a riskier investment behavior and prefer the riskier asset, whereas subjects with penalty incentives invest conservatively and mainly hold cash. Since we find no difference in risk attitude of subjects prior to the experiment, differences in investment behavior are induced by the applied incentives. Our results highlight that incentives on financial markets have a huge impact on asset prices and investment behavior. (C) 2014 Elsevier B.V. All rights reserved.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)
SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Nyckelord

Incentives
Trading behavior
Market efficiency
Experimental finance
PROSPECT-THEORY
MARKETS
BUBBLES
RISK
EXPECTATIONS
UNCERTAINTY
LOTTERIES
CRASHES
Economics

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Kleinlercher, D.
Huber, J.
Kirchler, Michae ...
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