| 1. |
- Andersson, Maria, 1977, et al.
(författare)
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A Social-Psychological Perspective on Herding in Stock Markets
- 2014
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Ingår i: The Journal of Behavioral Finance. - : Informa UK Limited. - 1542-7560 .- 1542-7579. ; 15:3, s. 226-234
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Tidskriftsartikel (refereegranskat)abstract
- A social-psychological perspective conceives of herding in stock markets as informative social influence resulting from heuristic or systematic information processing. In three laboratory experiments employing undergraduates we apply this perspective to investigate factors that prevent herd influence that would lead to inaccurate predictions of stock prices. In Experiment 1 we show that an economic reward for making the same predictions as the herd increases the influence of a majority but not the influence of a minority, and that an individual economic reward for making accurate predictions reduces the influence of the majority. In Experiment 2 we show a reduced influence of a majority herd’s inaccurate predictions when requiring assessments of the accuracy of the majority herd´s predictions as compared to requiring judgments of their consistency. Experiment 3 shows that a lower volatility of stock prices reduces the influence of a majority herd´s inaccurate predictions
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| 2. |
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| 3. |
- Andersson, Maria, 1977, et al.
(författare)
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Effects of consistency and accurate predictions of stock prices on herding in a simulated financial market.
- 2008
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Ingår i: Poster presented at the 29th annual conference of the Society for Judgment and Decision Making, Chicago, USA..
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Konferensbidrag (övrigt vetenskapligt/konstnärligt)abstract
- In a simulated financial market setting we investigate the degree to which participants in judgment tasks were influenced by other (fictitious) participants’ judgments. Two experiments examine the influence from random vs. accurate majorities (Experiment 1), random vs. accurate minorities (Experiment 2), and whether the influence was affected by instructing participants to focus on the accuracy in performance (Experiments 1 and 2). Results show that participants followed majorities irrespectively of their level of accuracy, whereas accurate minorities were more influential than random minorities. The focus instruction decreased majority influence, regardless of accuracy, but increased the influence from accurate minorities.
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| 4. |
- Andersson, Maria, 1977, et al.
(författare)
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Effects of financial incentives on herding in simulated financial markets
- 2008
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Ingår i: Paper presented at the International Association for Research in Economic Psychology (IAREP), Rome, Italy..
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Konferensbidrag (refereegranskat)abstract
- Herding in financial markets refers to that investors influence each other when making investment decisions. In these experimental studies, herding leads to worse performance relative to relying on private information. Previous studies of herding have shown that majorities in general are more influential than minorities. The aim of this research was to investigate whether financial incentives impact herding with majorities and minorities under these conditions. In two experimental simulations of a financial market, participants predicted an “upmarket” or “downmarket” conditional on diagnostic information presented on each trial. In Experiment 1, participants in an individual condition only received private information, while participants in a group condition, in addition, received information about randomly generated predictions ostensibly made by three others. Economic incentives for accurate predictions were based on individual performance, and were hypothesized to counteract reliance on invalid information about the herd’s choices. As expected, performance was worse in the group condition than in the individual condition, implying that participants were influenced by the herd. In Experiment 2, the effects of financial incentives for making predictions similar to either the majority or the minority of the others were examined. We hypothesized that financially rewarding group performance may reinforce non-systematic processing, and hence enhance majority influence. Since minority influence is associated with systematic processing, we hypothesized that systematic processing in minority conditions may increase the influence of the private information, and thus improve performance. The results showed that participants followed the majority but not the minority. One explanation for the asymmetry in the effects of rewarding herding with a majority and a minority may be the notion that the tendency to conform overrides systematic processing in majority influence, whereas the reverse would be true in minority influence.
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| 5. |
- Andersson, Maria, 1977, et al.
(författare)
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Effects of stock investments of information about short versus long price series
- 2012
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Ingår i: Review of behavioral finance. - : Emerald. - 1940-5979. ; 4:2, s. 81-97
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Tidskriftsartikel (refereegranskat)abstract
- Purpose – The purpose of this paper is to investigate whether stock price predictions and investment decisions improve by exposure to increasing price series. Design/methodology/approach – The authors conducted three laboratory experiments in which undergraduates were asked to role-play being investors buying and selling stock shares. Their task was to predict an unknown closing price from an opening price and to choose the number of stocks to purchase to the opening price (risk aversion) or the closing price (risk taking). In Experiment 1 stock prices differed in volatility for increasing, decreasing or no price trend. Prices were in different conditions provided numerically for 15 trading days, for the last 10 trading days, or for the last five trading days. In Experiment 2 the price series were also visually displayed as scatter plots. In Experiment 3 the stock prices were presented for the preceding 15 days, only for each third day (five days) of the preceding 15 days, or as five prices, each aggregated for three consecutive days of the preceding 15 days. Only numerical price information was provided. Findings – The results of Experiments 1 and 2 showed that predictions were not markedly worse for shorter than longer price series. Possibly because longer price series increase information processing load, visual information had some influence to reduce prediction errors for the longer price series. The results of Experiment 3 showed that accuracy of predictions increased for less price volatility due to aggregation, whereas again there was no difference between five and 15 trading days. Purchase decisions resulted in better outcomes for the aggregated prices. Research limitations/implications – Investors´ performance in stock markets may not improve by increasing the length of evaluation intervals unless the quality of the information is also increased. The results need to be verified in actual stock markets. Practical implications – The results have bearings on the design of bonus systems. Originality/value – The paper shows how stock price predictions and buying and selling decisions depend on amount and quality of information about historical prices.
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| 6. |
- Andersson, Maria, 1977, et al.
(författare)
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Experimental Studies of Majority Influences in Financial Markets.
- 2008
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Ingår i: Paper presented at the 6th Nordic conference on group and social psychology (GRASP), Lund University, Sweden.
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Konferensbidrag (refereegranskat)abstract
- Herding in financial markets refers to that investors imitate others when making investment decisions. The aim of this research is to investigate factors that would break influences of a majority of others. In one experiment we investigate the impact of the size of a herd (majority vs. minority), accuracy of the herds’ predictions, and attentional focus. Undergraduates serving as participants are asked to predict fictitious stock prices in 50 trials, conditional on information about the current price and predictions made by five fictitious other participants. The prices and the others’ predictions are generated by random sampling. A majority of the others’ predictions is correlated (rs .95), and the predictions made by the majority are either random (uncorrelated with the price, r <.20) or accurate (correlated with the price, range of rs equal to .65 - .85). Participants are instructed to focus their attention on either accuracy or consistency of the others’ predictions. The results showed that a focus on accuracy reduced majority influence, whereas a focus on consistency had no effect. This was true both in the conditions with accurate and inaccurate majorities. An ongoing additional experiment investigates whether an accurate minority has an influence when its predictions have higher predictive validity than the price. The level of accuracy in the predictions made by the minority is either random (uncorrelated with the price, r <.20) or accurate (correlated with the price, rs .95).
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| 7. |
- Andersson, Maria, 1977, et al.
(författare)
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Hållbara bonussystem : Sustainable bonus systems
- 2011
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Ingår i: Hållbar utveckling - från risk till värde / L. G. Hassel, L.-O. Larsson & E. Nore (red.). - Malmö : Studentlitteratur. - 9789144075327 ; , s. 41-49
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Bokkapitel (övrigt vetenskapligt/konstnärligt)
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| 8. |
- Andersson, Maria, 1977
(författare)
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Social Influence in Stock Markets
- 2009
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Influences by others when making investments and predictions in stock markets, referred to as herding, is a widely discussed phenomenon in financial economics. This thesis aims to understand herding by applying theories of social influence. In a series of studies employing a multi-trial experimental approach, undergraduates made predictions of stock prices. On each trial they received information about the current price and the predictions made by other fictitious participants, forming a majority or a minority herd. Study I investigated how different rewards altered the level of influence from a herd making random predictions. Experiment 1 (n = 80) demonstrated that the tendency to follow others overrides the effect of a financial reward for individual performance. In Experiment 2 (n = 80) a reward for following a majority herd increased the influence, but a reward for following a minority herd did not. Addressing the importance of consistency for herding, in Study II (n = 96) consistency was varied both as agreement between the others’ predictions (correlation) and within the others’ predictions (variance). Correlation increased the herd influence, but no effect of variance was observed. Studies I and II suggested that the influence from a consistent random majority herd was associated with the use of a consensus heuristic. Study III further explored the processes mediating majority and minority influences, with the focus on accuracy motives. The results of Experiment 1 (n = 64) showed that the participants followed a majority herd independently of whether its predictions were accurate or random. In Experiment 2 (n = 80) the majority influence was reduced by requesting participants to focus their attention on the accuracy of the others’ predictions. It was found in Experiment 3 (n = 60) that a minority herd was influential only when its predictions were accurate and when the participants were requested to focus their attention on the accuracy of the others’ predictions. The focus instruction thus seemed to break the tendency to use a consensus heuristic. Study IV (n = 80) examined whether induced expertise and augmenting the validity of price information would have the same effect, showing that the others only influenced participants’ predictions when participants were non-experts and the price was invalid. The results of Studies I-IV demonstrate that in prediction tasks based on uncertain information people use heuristic processing more extensively than has been assumed in previous social influence research. A majority herd seems to be influential due to the use of a consensus heuristic. However, no support was found for the proposition that minority influence is associated with systematic processing. Instead, the tendency to follow the price instead of a minority suggests the use of a “minority heuristic”. Factors such as focus instructions, high price validity and expertise suppressed heuristic processing.
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| 9. |
- Andersson, Maria, 1977, et al.
(författare)
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Social influence on predictions of simulated stock prices
- 2009
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Ingår i: Journal of Behavioral Decision Making. ; 22, s. 271-279
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Tidskriftsartikel (refereegranskat)abstract
- Herding in financial markets refers to that investors are influenced by others. This study addresses the importance of consistency for herding. It is suggested that, in financial markets perceptions of consistency are based on repeated observations over time. Consistency may then be perceived as the agreement across time between investors’ predictions. In addition, consistency may be related to variance over time in each investor’s predictions. In an experiment using a Multiple Cue Probability Learning paradigm, 96 undergraduates made multi-trial predictions of future stock prices given information about the current price and the predictions made by five fictitious others. Consistency was varied between the others' predictions (correlation) and within the others’ predictions (variance). The results showed that the predictions were significantly influenced by the others’ predictions when these were correlated. No effect of variance was observed. Hence, participants were influenced by the others when they were in agreement, regardless of whether they varied their predictions over trials or not.
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| 10. |
- Andersson, Maria, 1977
(författare)
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Social Influences on Predictions in Simulated Financial Markets
- 2008
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Licentiatavhandling (övrigt vetenskapligt/konstnärligt)abstract
- During the last decades the interest in financial markets has increased enormously around the world. Since investors are economically dependent on their investments, it is essential fo them to make accurate investment predictions. One observed behaviour among stock investors in actual markets is that they tend to choose the same stocks. Such behaviour is referred to as herding when investors are imitating each other. This thesis examines whether different bonus systems or consistency among investors has an impact on the level of herding. In Study I undergraduates who were recruited as participants were in two experiments requested to predict an “upmarket” or “downmarket” conditional on diagnostic information and on the predictions ostensibly made by three others. Economic incentives for making the same predictions as either the majority or the minority of the others were introduced. In Study II other undergraduates who participated in two experiments predicted the future price of a stock given the current price and the predictions made by five fictitious others. Consistency was varied as variance within and between the others’ predictions. The existence of herding was supported in both studies. Financial rewards for following a majority or minority led however to asymmetrical results in Study I: the participants in the majority-bonus condition more frequently followed the majority, but no such effect was observed in the condition with a bonus for following the minority. The results of Study II showed that the level of following the herd increased with the number of the others’ predictions that were correlated
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