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Handbook of Experimental Finance
With an in-depth overview of the past, present and future of the field, The Handbook of Experimental Finance provides a comprehensive analysis of the current topics, methodologies, findings, and breakthroughs in research conducted with the help of experimental finance methodology. Leading experts suggest innovative ways of designing, implementing, analyzing, and interpreting finance experiments.
More Information
Critical Acclaim
Contributors
Contents
More Information
Offering an in-depth overview of the field''s past, present, and future, this Handbook provides a comprehensive analysis of the current topics, methodologies, findings, and breakthroughs in research conducted with the help of experimental finance methodology. Suggesting innovative ways of navigating and structuring financial markets, it also showcases the diversity and promise of using experiments in finance.
With contributions from leading experts, the Handbook begins with a series of investigations into human behavior in financial decision-making, asking methodological questions regarding subject pool choice, cognitive finance, physical and physiological measurement, and research directions. Stressing the dual nature of experimental finance, chapters then relate to market experiments by exploring applied topics, including bank runs, financial accounting and nudging. Finally, it examines experimental tools and methodologies, critical perspectives, roadmaps for implementation, and empirical testing of finance theories.
With examples of experiments that test the fundamental theoretical constructs in finance, this Handbook will prove a vital resource to students and scholars of finance, financial economics, and experimental methodology. It will also prove useful to practitioners and policymakers looking to innovate and experiment with their approaches to financial decision-making.
With contributions from leading experts, the Handbook begins with a series of investigations into human behavior in financial decision-making, asking methodological questions regarding subject pool choice, cognitive finance, physical and physiological measurement, and research directions. Stressing the dual nature of experimental finance, chapters then relate to market experiments by exploring applied topics, including bank runs, financial accounting and nudging. Finally, it examines experimental tools and methodologies, critical perspectives, roadmaps for implementation, and empirical testing of finance theories.
With examples of experiments that test the fundamental theoretical constructs in finance, this Handbook will prove a vital resource to students and scholars of finance, financial economics, and experimental methodology. It will also prove useful to practitioners and policymakers looking to innovate and experiment with their approaches to financial decision-making.
Critical Acclaim
‘The key aim of this Handbook is “to showcase the diversity of experimental finance topics and solidify the distinctiveness of experimental finance as a stand-alone ‘field’ from experimental economics” (p.1). This is intended to educate and to influence for all readers including uninitiated readers. At the end of studying this Handbook, all readers are convinced that this aim is accomplished. This is congratulatory for the eminent editors and all the contributors of 31 chapters, each focusing on a unique topic and contribution, in this excellent Handbook.’
– FPI Journal of Economics and Governance
– FPI Journal of Economics and Governance
Contributors
Contributors: Lucy Ackert, Jasmina Arifovic, Elena Asparouhova, Te Bao, Ciril Bosch-Rosa, Peter Bossaerts, Miloš Božović, Brice Corgnet, Sean Crockett, Johan de Jong, Karen De Meyst, John Dinsmore, Anil Donmez, Dragana Draganac, John Duffy, Eyal Ert, Sascha Füllbrunn, Ernan Haruvy, Réka Heim, Timo Heinrich, Felix Holzmeister, Jürgen Huber, Christoph Huber, Abigail Hurwitz, Christos A. Ioannou, Sabiou Inoua, Peiran Jiao, Eva Kaczko, Pascal Kieren, Hubert Janos Kiss, Christian König-Kersting, Ola Kvaløy, Yaron Lahav, John O. Ledyard, Wolfgang J. Luhan, Elizaveta Nekrasova, Marcelo Nepomuceno, Tibor Neugebauer, Sven Nolte, Charles Noussair, Stefan Palan, Hong Qu, Jean Paul Rabanal, Michael Razen, Daniel Reimsbach, Yohanes Eko Riyanto, Ismael Rodriguez-Lara, Alfonso Rosa-Garcia, Yefim Roth, Olga Rud, Mark Ryan, Dominik Schmidt, Jason Shachat, Vernon L. Smith, Joep Sonnemans, Doron Sonsino, Eric P. Stenstrom, Thomas Stöckl, Megan Tjandrasuwita, Stefan Trautmann, Steven Tucker, Jan Tuinstra, Matthew Walker, Hang Wang, Martin Weber, Ofir Yakobi, Eldad Yechiam
Contents
Contents:
Introduction to the Handbook of Experimental Finance 1
Sascha Füllbrunn, Ernan Haruvy
PART ONE BASIC RESEARCH
1 Current and possible future research directions in experimental finance 12
Charles Noussair
2 Experiments in finance: From no to maybe to yes! 17
Pascal Kieren, Martin Weber
3 The complementarity of experimental and archival finance research 26
Lucy F. Ackert, Hong Qu
4 Physiological measures in experimental finance 41
Eyal Ert, Abigail Hurwitz, Sven Nolte
5 Ambiguity, experience and unforeseen events in experimental finance 54
Stefan T. Trautmann
6 Experimental finance and financial professionals 64
Sascha Füllbrunn, Christoph Huber, Christian König-Kersting
7 Cognitive finance 73
Ciril Bosch-Rosa, Brice Corgnet
8 The perils of a blanket model: Financial anomalies and loss aversion 89
Eldad Yechiam
9 Testosterone and financial risk taking 98
John Dinsmore, Eric Stenstrom, Marcelo Vinhal Nepomuceno
10 On attention to information: The checking paradox 105
Yefim Roth, Ofir Yakobi
11 The double-channeled effects of experienced payoffs in investment decisions 117
Peiran Jiao
12 Investing other people’s money 132
Sascha Füllbrunn, Ola Kvaløy, Wolfgang Luhan
13 From the field to the lab: Professionals and bidding aggression 145
Timo Heinrich, Matthew James Walker
14 Coordination games: Escaping the straitjacket 152
Christos A. Ioannou
PART TWO APPLIED RESEARCH
15 Perishable goods versus re-tradable assets: A theoretical reappraisal
of a fundamental dichotomy 162
Sabiou M. Inoua, Vernon L. Smith
16 Pairing multi-market theory with experiments 172
Elena Asparouhova, Peter Bossaerts, Sean Crockett
17 The effect of favorable and unfavorable information on asset prices 194
Charles Noussair, Steven Tucker, Mark Ryan
18 Market experiments with multiple assets: A survey 213
John Duffy, Jean Paul Rabanal, Olga A. Rud
19 Individual evolutionary learning and zero-intelligence in
the continuous double auction 225
Jasmina Arifovic, Anil Donmez, John Ledyard, Megan Tjandrasuwita
20 Using results from learning to forecast laboratory experiments
to predict the effect of futures markets on spot market stability 250
Johan de Jong, Joep Sonnemans, Jan Tuinstra
21 Are you experienced? How the time spacing of traders’ market
experience impacts bubble formation in experimental asset markets 267
Jason Shachat, Hang Wang
22 Monetary policy and cash flow irregularity as drivers of asset price
bubbles: An experimental study 281
Dragana Draganac, Miloš Božović
23 Algorithmic trading in experimental markets with human traders:
A literature survey 302
Te Bao, Elizaveta Nekrasova, Tibor Neugebauer, Yohanes E. Riyanto
24 Asset market experiments with diverse information 323
Dominik Schmidt, Thomas Stöckl
25 Experimental bank runs 347
Hubert J. Kiss, Ismael Rodriguez-Lara, Alfonso Rosa-Garcia
26 Experiential learning in finance education – Applying experimental
finance methodology 362
Éva Kaczkó, Michael Razen
27 Experimental research in financial accounting 375
Daniel Reimsbach, Karen De Meyst
28 Corporate governance experiments 384
Ernan Haruvy
29 Nudging and RCTs in finance: A review of recent literature 395
Réka Heim, Jürgen Huber
30 A critical perspective on the conceptualization of risk in behavioral
and experimental finance 408
Felix Holzmeister, Christoph Huber, Stefan Palan
31 Stated risk preference predicts risk appetite in structured investment 414
Doron Sonsino, Yaron Lahav, Yefim Roth
Index 423
Introduction to the Handbook of Experimental Finance 1
Sascha Füllbrunn, Ernan Haruvy
PART ONE BASIC RESEARCH
1 Current and possible future research directions in experimental finance 12
Charles Noussair
2 Experiments in finance: From no to maybe to yes! 17
Pascal Kieren, Martin Weber
3 The complementarity of experimental and archival finance research 26
Lucy F. Ackert, Hong Qu
4 Physiological measures in experimental finance 41
Eyal Ert, Abigail Hurwitz, Sven Nolte
5 Ambiguity, experience and unforeseen events in experimental finance 54
Stefan T. Trautmann
6 Experimental finance and financial professionals 64
Sascha Füllbrunn, Christoph Huber, Christian König-Kersting
7 Cognitive finance 73
Ciril Bosch-Rosa, Brice Corgnet
8 The perils of a blanket model: Financial anomalies and loss aversion 89
Eldad Yechiam
9 Testosterone and financial risk taking 98
John Dinsmore, Eric Stenstrom, Marcelo Vinhal Nepomuceno
10 On attention to information: The checking paradox 105
Yefim Roth, Ofir Yakobi
11 The double-channeled effects of experienced payoffs in investment decisions 117
Peiran Jiao
12 Investing other people’s money 132
Sascha Füllbrunn, Ola Kvaløy, Wolfgang Luhan
13 From the field to the lab: Professionals and bidding aggression 145
Timo Heinrich, Matthew James Walker
14 Coordination games: Escaping the straitjacket 152
Christos A. Ioannou
PART TWO APPLIED RESEARCH
15 Perishable goods versus re-tradable assets: A theoretical reappraisal
of a fundamental dichotomy 162
Sabiou M. Inoua, Vernon L. Smith
16 Pairing multi-market theory with experiments 172
Elena Asparouhova, Peter Bossaerts, Sean Crockett
17 The effect of favorable and unfavorable information on asset prices 194
Charles Noussair, Steven Tucker, Mark Ryan
18 Market experiments with multiple assets: A survey 213
John Duffy, Jean Paul Rabanal, Olga A. Rud
19 Individual evolutionary learning and zero-intelligence in
the continuous double auction 225
Jasmina Arifovic, Anil Donmez, John Ledyard, Megan Tjandrasuwita
20 Using results from learning to forecast laboratory experiments
to predict the effect of futures markets on spot market stability 250
Johan de Jong, Joep Sonnemans, Jan Tuinstra
21 Are you experienced? How the time spacing of traders’ market
experience impacts bubble formation in experimental asset markets 267
Jason Shachat, Hang Wang
22 Monetary policy and cash flow irregularity as drivers of asset price
bubbles: An experimental study 281
Dragana Draganac, Miloš Božović
23 Algorithmic trading in experimental markets with human traders:
A literature survey 302
Te Bao, Elizaveta Nekrasova, Tibor Neugebauer, Yohanes E. Riyanto
24 Asset market experiments with diverse information 323
Dominik Schmidt, Thomas Stöckl
25 Experimental bank runs 347
Hubert J. Kiss, Ismael Rodriguez-Lara, Alfonso Rosa-Garcia
26 Experiential learning in finance education – Applying experimental
finance methodology 362
Éva Kaczkó, Michael Razen
27 Experimental research in financial accounting 375
Daniel Reimsbach, Karen De Meyst
28 Corporate governance experiments 384
Ernan Haruvy
29 Nudging and RCTs in finance: A review of recent literature 395
Réka Heim, Jürgen Huber
30 A critical perspective on the conceptualization of risk in behavioral
and experimental finance 408
Felix Holzmeister, Christoph Huber, Stefan Palan
31 Stated risk preference predicts risk appetite in structured investment 414
Doron Sonsino, Yaron Lahav, Yefim Roth
Index 423
