Near-losses in insurance markets: An experiment

Heinrich, Timo; Seifert, Matthias; Then, Franziska

doi:10.1016/j.econlet.2019.108781

Cited by 1 publication

(1 citation statement)

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“…These drastic events may have had a small influence on risk preferences (cf. Angrisani et al 2020;Heinrich, Seifert and Then 2020;Shachat, Walker and Wei 2021). 4 The RNNE bid function for the forward auction is 𝑏 𝑅𝑁𝑁𝐸,𝑖 (𝑣 𝑖 ) = 50 + 𝑣 𝑖 2 ⁄ , and for the reverse auction is 𝑏 𝑅𝑁𝑁𝐸,𝑖 (𝑐 𝑖 ) = 250 + 𝑐 𝑖 2 ⁄ .…”

Section: Discussionmentioning

confidence: 99%

From the field to the lab: Professionals and bidding aggression

Heinrich,

Walker

2022

Handbook of Experimental Finance

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We experimentally study the relationship between real-world trading experience and bidding aggression in a one-sided auction. We first present findings from a first-price auction experiment conducted with student subjects. We find that those subjects who report participating in a greater number of real-world auctions bid less aggressively in the lab. A similar relationship could explain why financial professionals are able to stabilize prices in asset markets. Thus, we conducted a second experiment focusing on experience in trading financial products. We find that those subjects who report trading in the stock market more frequently also bid less aggressively. We demonstrate that this relationship is robust to controlling for a selection effect among professionals due to risk preferences. Our findings contribute to the experimental finance literature documenting differences in behavioural biases between professionals versus students and suggest a new channel through which price bubbles might be attenuated in mature financial markets.

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Section: Discussionmentioning

confidence: 99%