A culture of greed: Bubble formation in experimental asset markets with greedy and non-greedy traders

Karlijn Hoyer, Stefan Zeisberger, Seger M. Breugelmans and Marcel Zeelenberg

Journal of Economic Behavior & Organization, 2023, vol. 212, issue C, 32-52

Abstract: This study investigates the relationship between the motive of greed and various asset market indicators, such as trading activity and bubble formation (i.e., mispricing, overpricing, and price amplitude). We ran experimental asset markets that allowed us to measure individuals’ greed in order to create markets populated with greedy individuals and markets with non-greedy individuals. Regarding trading activity, we found that greedier individuals had higher trading activity on the individual level but not on the market level. On the market level, high-greed markets exhibited less frequent and smaller price bubbles than markets with less greedy traders. If our findings translate to actual markets, greed itself might not contribute to asset market bubbles.

Keywords: Dispositional greed; Experimental finance; Experimental asset markets; Bubbles, Mispricing (search for similar items in EconPapers)
JEL-codes: G12 G41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:212:y:2023:i:c:p:32-52

DOI: 10.1016/j.jebo.2023.05.005

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