Emotions and market activity: Cause or consequence?

Daniel Gotsman, Charles N. Noussair and Yiwei Qu

No 2026-01, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

Abstract: Many observers have asserted that there is a correlation between traders' moods and asset market behavior, with Joviality associated with high prices and Fear with low prices. In this paper, we conduct a laboratory experiment to examine the direction of causality in this relationship. The results show that moods, induced by videos, shown in virtual reality, do not influence market prices. However, there is a strong relationship between market activity and subsequent emotional states, suggesting that the correlation between emotional states and market activity is driven by the influence of market activity on emotional states, not the other way around.

Pages: 53
Date: 2026-04
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Persistent link: https://EconPapers.repec.org/RePEc:exc:wpaper:2026-01

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