Diversity in Cognitive Ability Enlarges Mispricing in Experimental Asset Markets
Nobuyuki Hanaki,
Eizo Akiyama,
Yukihiko Funaki () and
Ryuichiro Ishikawa
Additional contact information
Eizo Akiyama: University of Tsukuba, Japan
No 2017-08, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France
Abstract:
Does diversity of cognitive ability among market participants increase mispricing? Does common knowledge of heterogeneity in relation to cognitive ability of market participants further increase mispricing? We investigated these questions by measuring subjects' cognitive ability and categorizing those above median ability as type `H' and those below median ability as type `L'. We then constructed three market types, each containing six traders: 6H, 6L, and 3H3L. Subjects were informed of their own cognitive type and, depending on the treatment, that of the others in their market. We found that heterogeneous markets (3H3L) generated significantly larger mispricing than homogeneous markets (6H or 6L) regardless of whether subjects were informed about the cognitive type of others in their market. Thus, diversity of cognitive ability among market participants increased mispricing. However, common knowledge of heterogeneity or homogeneity in the market did not have a signi cant additional effect.
Keywords: Cognitive ability; Heterogeneity; Mispricing; Experimental asset markets (search for similar items in EconPapers)
JEL-codes: C90 D84 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
http://195.220.190.85/GREDEG-WP-2017-08.pdf First version, 2017 (application/pdf)
Related works:
Working Paper: Diversity in Cognitive Ability Enlarges Mispricing in Experimental Asset Markets (2017) ![Downloads](/downloads_econpapers.gif)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2017-08
Access Statistics for this paper
More papers in GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France Contact information at EDIRC.
Bibliographic data for series maintained by Patrice Bougette ().