Anchoring and Manipulation in Speculative Markets: A Field Experiment

26 Pages Posted: 13 Jan 2017 Last revised: 8 May 2017

See all articles by Alasdair Brown

Alasdair Brown

University of East Anglia (UEA)

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: May 8, 2017

Abstract

A common finding in laboratory studies is that subjects anchor on irrelevant initial cues when valuing assets. We run a field experiment to examine whether this heuristic can be exploited to manipulate prices in real markets. We provide early quotes in a series of horse race betting markets, and randomly vary whether these quotes are high or low. We find that subsequent prices are indeed distorted in the direction of our anchor, and that the effect spills over into correlated markets. Furthermore, we show that there are positive returns to some market manipulation strategies predicated on exploiting the anchoring heuristic.

Keywords: anchoring, market manipulation, betting, field experiment

JEL Classification: G02, G12, G14

Suggested Citation

Brown, Alasdair and Yang, Fuyu, Anchoring and Manipulation in Speculative Markets: A Field Experiment (May 8, 2017). Available at SSRN: https://ssrn.com/abstract=2898142 or http://dx.doi.org/10.2139/ssrn.2898142

Alasdair Brown (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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