Do option-like incentives induce overvaluation? Evidence from experimental asset markets

Martin Holmén, Michael Kirchler, Daniel Kleinlercher

Forskningsoutput: Kapitel i bok/rapport/konferenshandlingKonferensbidragVetenskapligPeer review

Sammanfattning

One potential reason for bubbles evolving prior to the financial crisis
was excessive risk taking stemming from option-like incentive schemes in
financial institutions. By running laboratory asset markets, we investigate
the impact of option-like incentives on price formation and trading behavior.
(i) We observe that option-like incentives induce significantly higher
market prices than linear incentives. (ii) We further find that option-like
incentives provoke subjects to behave differently and to take more risk
than subjects with linear incentives. (iii) We finally show that trading at
inflated prices is rational for subjects with option-like incentives since it
increases their expected payout.
OriginalspråkEngelska
Titel på gästpublikationFinancial Management Association European Conference
Utgivningsdatum2012
StatusPublicerad - 2012
MoE-publikationstypA4 Artikel i en konferenspublikation
EvenemangFinancial Management Association European Conference - Istanbul , Turkiet
Varaktighet: 06.06.201208.06.2012

Nyckelord

  • 511 Nationalekonomi
  • Finansiell ekonomi

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