| 1. |
- Fang, Dawei, 1983, et al.
(author)
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How tournament incentives affect asset markets: A comparison between winner-take-all tournaments and elimination contests
- 2017
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In: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 75, s. 1-27
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Journal article (peer-reviewed)abstract
- We investigate the impact of investment managers׳ tournament incentives on investment strategies and market efficiency, distinguishing between winner-take-all tournaments (WTA), where a minority wins, and elimination contests (EC), where a majority wins. Theoretically, we show that investment managers play heterogeneous strategies in WTA and homogeneous strategies in EC, and markets are more prone to mispricing in WTA than in EC. Experimentally, we find that investment managers play more heterogeneous strategies in WTA than in EC, but this does not trigger significant differences in prices. Moreover, prices in WTA and EC do not differ significantly from markets composed of linearly incentivized subjects.
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| 2. |
- Holmén, Martin, 1966, et al.
(author)
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Do option-like incentives induce overvaluation? Evidence from experimental asset markets
- 2014
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In: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 40, s. 179-194
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Journal article (peer-reviewed)abstract
- One potential reason for bubbles evolving prior to the financial crisis was excessive risk taking stemming from option-like incentive schemes in financial institutions. By running laboratory asset markets, we investigate the impact of option-like incentives on price formation and trading behavior. The main results are that (i) we observe significantly higher market prices with option-like incentives than linear incentives. (ii) We further find that option-like incentives provoke subjects to behave differently and to take more risk than subjects with linear incentives. (iii) We finally show that trading at inflated prices is rational for subjects with option-like incentives since it increases their expected payout. © 2014 Elsevier B.V.
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| 3. |
- Kirchler, Michael, 1977, et al.
(author)
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Market microstructure matters when imposing a Tobin tax-Evidence from the lab
- 2011
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In: Journal of Economic Behavior & Organization. - 0167-2681. ; 80:3, s. 586-602
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Journal article (peer-reviewed)abstract
- Trading in FX markets is dominated by two microstructures: exchanges with market makers and OTC-markets without market makers. Using laboratory experiments we test whether the impact of a Tobin tax is different in these two market microstructures. We find that (i) in markets without market makers an unilaterally imposed Tobin tax (i.e. a tax haven exists) increases volatility. (ii) In contrast, in markets with market makers we observe a decrease in volatility in unilaterally taxed markets. (iii) An encompassing Tobin tax has no impact on volatility in either setting. Efficiency does not vary significantly across tax regimes.
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