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Kocher, Martin; Lucks, Konstantin; Schindler, David (2018): Unleashing Animal Spirits - Self-Control and Overpricing in Experimental Asset Markets. Collaborative Research Center Transregio 190, Discussion Paper No. 81
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Abstract

One explanation for overpricing on asset markets is a lack of traders' self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and systematic overpricing on financial markets. Our setup can detect some of the channels through which individual self-control restrictions could transmit into irrational exuberance in markets. Our data indicate a large direct effect of restricted self-control abilities on market overpricing. Low self-control traders report stronger emotions after the market.