Fight or freeze? Individual differences in investors' motivational systems and trading in experimental asset markets

Journal of Economic Psychology

Volumn 34, Issue , 2013, Pages 195-209

  Muehlfeld, Katrin ^a,c   Weitzel, Utz ^d   van Witteloostuijn, Arjen ^b,c,e  

^a UTRECHT UNIVERSITY   (Netherlands)

^b TILBURG UNIVERSITY   (Netherlands)

^c UNIVERSITY OF ANTWERP   (Belgium)

^d RADBOUD UNIVERSITY NIJMEGEN   (Netherlands)

^e TILBURG UNIVERSITY   (Netherlands)

Author keywords

Behavioral approach system behavioral inhibition system; Experimental asset markets; Fundamental shocks; Individual decision making; Investment decisions

Indexed keywords

EID: 84873314257     PISSN: 01674870     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.joep.2012.09.014     Document Type: Article

References (79)

1. Ackert L.F., Charupat N., Church B.K., Deaves R. Margin, short selling, and lotteries in experimental asset markets. Southern Economic Journal 2006, 73(2):419-436.
2. Ackert L.F., Church B.K. The effects of subject pool and design experience on rationality in experimental asset markets. Journal of Psychology and Financial Markets 2001, 2(1):6-28.
3. Ackert L.F., Deaves R. Behavioral finance: Psychology, decision-making, and markets 2010, South-Western Cengage Learning, Mason, OH.
4. Avila C., Parcet M.A., Ortet G., Ibánez-Ribes M.I. Anxiety and counter-conditioning: The role of the behavioral inhibition system in the ability to associate aversive stimuli with future rewards. Personality and Individual Differences 1999, 27:1167-1179.
5. Bagozzi R., Yi Y. On the evaluation of structural equation models. Journal of the Academy of Marketing Science 1988, 16:74-94.
6. Barber B.M., Odean T. Boys will be boys: Gender, overconfidence and common stock investment. Quarterly Journal of Economics 2001, 116(1):261-292.
7. Barberis N., Shleifer A., Vishny R. A model of investor sentiment. Journal of Financial Economics 1998, 49:307-343.
8. Barrick M.R., Stewart G.L., Neubert M.J., Mount M.K. Relating member ability and personality to work team processes and team effectiveness. Journal of Applied Psychology 1998, 83:377-391.
9. Belsley D.A., Kuh E., Welsch R.E. Regression diagnostics 1980, John Wiley, New York, NY.
10. Biais B., Hilton D., Mazurier K., Pouget S. Judgmental overconfidence, self-monitoring, and trading performance in an experimental financial market. Review of Economic Studies 2005, 72:287-312.
11. Biais B., Weber M. Hindsight bias, risk perception and investment performance. Management Science 2009, 55:1018-1029.
12. Bloomfield R.J., Tayler W.B., Zhou F. Momentum, reversal, and uninformed traders in laboratory markets. Journal of Finance 2009, 64:2535-2558.
13. Brenner S.L., Beauchaine T.P., Sylvers P.D. A comparison of psychophysiological and self-report measures of BAS and BIS activation. Psychophysiology 2005, 42:108-115.
14. Carver C.S., White T.L. Behavioral inhibition, behavioral activation, and affective responses to impending reward and punishment: The BIS/BAS scales. Journal of Personality and Social Psychology 1994, 67:319-333.
15. Chen G., Kim K.A., Nofsinger J.R., Rui O.M. Trading performance, disposition effect, overconfidence, representativeness bias and experience of emerging market investors. Journal of Behavioral Decision Making 2007, 20:425-451.
16. Chui P.M.W. An experimental study of the disposition effect: Evidence from Macau. Journal of Psychology and Financial Markets 2001, 2:216-222.
17. Cloninger C.R. A systematic method for clinical description and classification of personality variants. Archives of General Psychiatry 1987, 44:573-588.
18. Da Costa N., Mineto C., Da Silva S. Disposition effect and gender. Applied Economics Letters 2008, 15:429-437.
19. Daniel K., Hirshleifer D., Subrahmanyam A. Investor psychology and security market under- and over-reaction. Journal of Finance 1998, 53:1839-1885.
20. Deaves R., Lüders E., Luo G.Y. An experimental test of the impact of overconfidence and gender on trading activity. Review of Finance 2009, 13:555-575.
21. Depue R.A., Iacono W.G. Neurobehavioral aspects of affective disorders. Annual Review of Psychology 1989, 40:457-492.
22. Dhar R., Zhu N. Up close and personal: Investor sophistication and the disposition effect. Management Science 2006, 52:726-740.
23. Einiö M., Kaustia M., Puttonen V. Price setting and the reluctance to realize losses in apartment markets. Journal of Economic Psychology 2008, 29:19-34.
24. Fama E.F. Efficient capital markets: A review of theory and empirical work. Journal of Finance 1970, 25(2):383-417.
25. Fellner G., Maciejovsky B. Risk attitude and market behavior: Evidence from experimental asset markets. Journal of Economic Psychology 2007, 28:338-350.
26. Fenton-O'Creevy M., Nicholson N., Soane E., Willman P. Traders: Risks, decisions, and management in financial markets 2005, Oxford University Press, Oxford, UK.
27. Fischbacher U. Z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics 2007, 10:171-178.
28. Forbes J., Kara S.M. Confidence mediates how investment knowledge influences investing self-efficacy. Journal of Economic Psychology 2010, 31:435-443.
29. Fowles D.C. The three-arousal model: Implications of ray's two-factor learning theory for heart rate, electrodermal activity, and psychopathy. Psychophysiology 1980, 17:87-104.
30. Fowles D.C. Psychophysiology and psychopathology: A motivational approach. Psychophysiology 1988, 25:373-391.
31. Fowles D.C. Biological variables in psychopathology: A psychobiological perspective. Comprehensive handbook of psychopathology 1993, 57-82. Plenum, New York, NY. 2nd ed. P.B. Sutker, H.E. Adams (Eds.).
32. Franken I.H.A., Muris P. Individual differences in decision making. Personality Individual Differences 2005, 39:991-998.
33. Friedman D. Privileged traders and asset market efficiency: A laboratory study. Journal of Financial and Quantitative Analysis 1993, 28(4):515-534.
34. Gable P., Harmon-Jones E. The motivational dimensional model of affect: Implications for breadth of attention, memory, and cognitive categorization. Cognition & Emotion 2010, 24:322-337.
35. Gächter, S., Johnson, E. J., & Herrmann, A. (2007). Individual-level loss aversion in riskless and risky choices. CeDEx discussion paper no. 2007-02.
36. Genesove D., Mayer C. Loss aversion and seller behavior: Evidence from the housing market. Quarterly Journal of Economics 2001, 116:1233-1260.
37. Gneezy U., Kapteyn A., Potters J. Evaluation periods and asset prices in a market experiment. Journal of Finance 2003, 58:821-837.
38. Gray J.A. The neuropsychology of anxiety: An enquiry into the functions of the septo-hippocampal system 1982, Oxford University Press, New York, NY.
39. Gray J.A. The psychology of fear and stress 1987, Cambridge University Press, Cambridge, UK.
40. Gray J.A. Personality dimensions and emotion systems. The nature of emotion 1994, 329-331. Oxford University Press, New York, NY. P. Ekman, R.J. Davidson (Eds.).
41. Grinblatt M., Keloharju M. Sensation seeking, overconfidence, and trading activity. Journal of Finance 2009, 64:549-578.
42. Haigh M.S., List J.A. Do professional traders exhibit myopic loss aversion? An experimental analysis. Journal of Finance 2005, 60:523-534.
43. Hair J.F., Black W.C., Babin B.J., Anderson R.E., Tatham R.L. Multivariate data analysis 2006, Pearson Prentice-Hall, Upper Saddle River, NJ. 6th ed.
44. Holt C.A., Laury S.K. Risk aversion and incentive effects. American Economic Review 2002, 92:1644-1655.
45. Huber, P. (1967). The behavior of maximum likelihood estimates under non-standard conditions. In Proceedings of the fifth Berkeley symposium on mathematical statistics and probability (Vol. 1, pp. 221-233). Berkeley, CA: University of California Press.
46. Kahneman D., Tversky A. Prospect theory: An analysis of decision under risk. Econometrica 1979, 47(2):263-292.
47. Kim D.-Y., Lee J.-H. Effects of the BAS and BIS on decision-making in a gambling task. Personality and Individual Differences 2011, 50(7):1131-1135.
48. Kirchler M. Underreaction to fundamental information and asymmetry in mispricing between bullish and bearish markets. An experimental study. Journal of Economic Dynamics and Control 2009, 33:491-506.
49. Liu H.-H. Impact of regulatory focus on ambiguity aversion. Journal of Behavioral Decision Making 2011, 24:412-430.
50. Lo A.W., Repin D.V., Steenbarger B.N. Fear and greed in financial markets: A clinical study of day-traders. American Economic Review 2005, 95:352-359.
51. Loibl C., Hira T.K. Investor information search. Journal of Economic Psychology 2009, 30:24-41.
52. McInish T.H. A game-simulation of stock market behavior: An extension. Simulations Games 1980, 11:477-484.
53. McInish T.H. Individual investors and risk-taking. Journal of Economic Psychology 1982, 2:125-136.
54. McInish T.H., Srivastava R.K. The nature of individual investors' heterogeneous expectations. Journal of Economic Psychology 1984, 5:251-263.
55. Neuman G.A., Wagner S.H., Christiansen N.D. The relationship between work team personality composition and the job performance of teams. Group & Organization Management 1999, 24:28-45.
56. Odean T. Are investors reluctant to realize their losses?. Journal of Finance 1998, 53:1775-1798.
57. O'Hara M. Market microstructure theory 1995, Blackwell Business, Cambridge, MA.
58. Oliven K., Rietz T.A. Suckers are born but markets are made: Individual rationality, arbitrage, and market efficiency on an electronic futures market. Management Science 2004, 50:336-351.
59. Powell M., Ansic D. Gender differences in risk behaviour in financial decision-making: An experimental analysis. Journal of Economic Psychology 1997, 18:605-628.
60. Quay H.C. The behavioral reward and inhibition system in childhood behavior disorder 1988, Pergamon Press, Elmsford, NY.
61. Rabin M. Risk aversion and expected-utility theory: A calibration theorem. Econometrica 2000, 68:1281-1293.
62. Rose, J. P. (2009). Approach-avoidance and optimism. Unpublished Ph.D. dissertation. Iowa, IA: University of Iowa.
63. Rotter, J. B. (1966). Generalized expectancies for internal versus external control of reinforcement. Psychological Monographs, Complete number 609.
64. Sachse K., Jungermann H., Belting J.M. Investment risk - The perspective of individual investors. Journal of Economic Psychology 2012, 33:437-447.
65. Shefrin H., Statman M. The disposition to sell winners too early and ride losers too long: Theory and evidence. Journal of Finance 1985, 40:777-790.
66. Smith V.L., Suchanek G.L., Williams A.W. Bubbles, crashes and endogenous expectations in experimental asset spot markets. Econometrica 1988, 56:1119-1151.
67. Snyder M., Gangestad S. On the nature of self-monitoring. Journal of Personality and Social Psychology 1986, 51:125-139.
68. Stracca L. Behavioral finance and asset prices: Where do we stand?. Journal of Economic Psychology 2004, 25:373-405.
69. Studenmund A.H. Using econometrics: A practical guide 1992, Harper Collins, New York, NY.
70. Thayer R.E. Activation (arousal): The shift from a single to a multidimensional perspective. The biological basis of personality and behavior 1986, Vol. 1:115-127. Hemisphere, London, UK.
71. Theissen E. Market structure, informational efficiency, and liquidity: An experimental comparison of auction and dealer markets. Journal of Financial Markets 2000, 3:333-363.
72. Tversky A., Kahneman D. Judgment under uncertainty: Heuristics and biases. Science 1974, 185:1124-1131.
73. Van Honk J., Hermans E.J., Putman P., Montagne B., Schutter D.J. Defective somatic markers in sub-clinical psychopathy. Neuroreport 2002, 13:1025-1027.
74. Watson D., Wiese D., Vaidya J., Tellegen A. The two general activation systems of affect: Structural findings, evolutionary considerations, and psychobiological evidence. Journal of Personality and Social Psychology 1999, 76:820-838.
75. Weber, M., & Welfens, F. (2007). How do markets react to fundamental shocks? An experimental analysis on underreaction and momentum. . http://www.ssrn.com/abstract=1022924.
76. White H. A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 1980, 48:817-838.
77. Zinbarg R.E., Mohlman J. Individual differences in the acquisition of affectively valenced associations. Journal of Personality and Social Psychology 1998, 74:1024-1040.
78. Zuckerman M. Sensation seeking: Beyond the optimal level of arousal 1979, John Wiley, New York, NY.
79. Zuckerman M. Behavioral expressions and biosocial bases of sensation seeking 1994, Cambridge University Press, Cambridge, UK.