Does Personality Drive Price Bubbles?
Posted: 11 Jul 2016
Date Written: July 9, 2016
We analyze whether differences in market-wide levels of investor personality influence experimental asset market outcomes in terms of price bubbles and levels. We employ a questionnaire to determine investor personality and combine the survey data with data from experimental asset markets. We run 17 separate asset markets with an overall number of 364 undergraduate business students. We find that markets with a higher proportion of extraverted and a lower proportion of neurotic participants exhibit longer bubble periods, higher prices, and higher limit orders at the beginning of the first trading session than markets with fewer extraverted and more neurotic participants. Overall, our findings suggest that market-wide personality levels influence market outcomes and yield implications for further research in financial markets.
Keywords: Investor Personality, Price Bubble, Experimental Asset Markets, Behavioral Finance
JEL Classification: G02, G11, C92
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