A Culture of Greed: Bubble Formation in Experimental Asset Markets with Greedy and Non-Greedy Traders

35 Pages Posted: 11 May 2021 Last revised: 6 Apr 2022

See all articles by Karlijn Hoyer

Karlijn Hoyer

Tilburg University

Stefan Zeisberger

Radboud University, Institute for Management Research; University of Zurich, Department of Banking and Finance

Seger Breugelmans

Tilburg University

Marcel Zeelenberg

Tilburg University - Faculty of Social and Behavioural Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: April 4, 2022

Abstract

We investigate the relation between the motive of greed and several asset market indicators such as trading activity and bubble formation in the form of mispricing, overpricing, and price amplitude. To that end, we run experiments in which we are able to measure individuals’ greed and create markets populated with greedy and markets with non-greedy investors. High-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. As for trading activity, we find only small evidence of greedier individuals showing higher trading activity. If our findings translate to actual markets, our findings suggest that, contrary to common suggestions, greed might not contribute negatively to the emergence of financial crises.

Keywords: Dispositional Greed, Experimental Finance, Experimental Asset Markets, Bubbles, Mispricing

JEL Classification: G12, G41

Suggested Citation

Hoyer, Karlijn and Zeisberger, Stefan and Breugelmans, Seger and Zeelenberg, Marcel, A Culture of Greed: Bubble Formation in Experimental Asset Markets with Greedy and Non-Greedy Traders (April 4, 2022). Available at SSRN: https://ssrn.com/abstract=3842898 or http://dx.doi.org/10.2139/ssrn.3842898

Karlijn Hoyer (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Stefan Zeisberger

Radboud University, Institute for Management Research ( email )

Nijmegen
Netherlands

University of Zurich, Department of Banking and Finance ( email )

Zürich
Switzerland

Seger Breugelmans

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Marcel Zeelenberg

Tilburg University - Faculty of Social and Behavioural Sciences ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
31 (13) 4668276 (Phone)
31 (13) 4662370 (Fax)

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