Craving for Money? Empirical Evidence from the Laboratory and the Field

94 Pages Posted: 1 Apr 2020 Last revised: 16 Aug 2021

See all articles by Elise Payzan-LeNestour

Elise Payzan-LeNestour

University of New South Wales; Financial Research Network (FIRN)

James Doran

University of New South Wales

Date Written: August 15, 2021

Abstract

In a series of controlled laboratory experiments, we provide evidence for "Craving by Design" (CbD) hypothesis, where people knowingly expose themselves to negative tail risk due to craving for monetary gains. We then document the "cheap call selling anomaly:" selling calls priced below $1 has consistently delivered negative long-term returns and negative skew, which is puzzling when viewed from the prevailing body of knowledge alone, though expected when the latter is augmented with CbD hypothesis. These findings bring novel insights into the topic of limited self-control, the issue of problem gambling in recreational gamblers, and the motivations underlying investor decisions.

Keywords: Decision making under risk and uncertainty, Self-Control, Craving, Gambling

JEL Classification: C91, D87, G41

Suggested Citation

Payzan-LeNestour, Elise and Doran, James, Craving for Money? Empirical Evidence from the Laboratory and the Field (August 15, 2021). Available at SSRN: https://ssrn.com/abstract=3545804 or http://dx.doi.org/10.2139/ssrn.3545804

Elise Payzan-LeNestour (Contact Author)

University of New South Wales ( email )

Australian School of Business
Sydney, NSW 2052
Australia

HOME PAGE: http://www.elisepayzan.com/

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

James Doran

University of New South Wales ( email )

College Rd
Sydney, NSW 2052
Australia

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