Pub Date : 2025-05-01DOI: 10.1016/j.jbef.2025.101049
Philipp Chapkovski , Mariana Khapko , Marius Zoican
We conduct a randomized online experiment to examine how digital nudges to hold volatile assets, a form of trading gamification, influence retail investors’ risk-taking behavior. A sample of 605 participants from four countries traded a virtual asset on an experimental platform. The gamified platform incorporates digital nudges, such as achievement badges and motivational prompts, explicitly designed to encourage holding decisions. We find that nudges significantly amplify risk-taking, particularly in high-volatility environments. The effect is most pronounced among inexperienced traders with lower financial literacy, with a one standard deviation increase in financial literacy reducing the impact by 56%.
{"title":"Gamified risk-taking","authors":"Philipp Chapkovski , Mariana Khapko , Marius Zoican","doi":"10.1016/j.jbef.2025.101049","DOIUrl":"10.1016/j.jbef.2025.101049","url":null,"abstract":"<div><div>We conduct a randomized online experiment to examine how digital nudges to hold volatile assets, a form of trading gamification, influence retail investors’ risk-taking behavior. A sample of 605 participants from four countries traded a virtual asset on an experimental platform. The gamified platform incorporates digital nudges, such as achievement badges and motivational prompts, explicitly designed to encourage holding decisions. We find that nudges significantly amplify risk-taking, particularly in high-volatility environments. The effect is most pronounced among inexperienced traders with lower financial literacy, with a one standard deviation increase in financial literacy reducing the impact by 56%.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101049"},"PeriodicalIF":4.3,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143917553","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-01DOI: 10.1016/j.jbef.2025.101060
Fumiko Hayashi, Aditi Routh
Cryptocurrency owners without sufficient financial literacy and risk tolerance may be financially vulnerable, as the cryptocurrency market is highly volatile and lacks consumer protections. Our study divides cryptocurrency owners based on their purpose for holding cryptocurrencies—investment only (investors), transactions only (transactors), and a mix of investment and transactions (mix users)—and examines how each group correlates with financial literacy and risk tolerance compared to consumers who do not own cryptocurrencies (nonowners). Using the 2022 Survey of Household Economics and Decisionmaking, we find that investors and mix users are significantly or moderately more financially literate and risk tolerant than nonowners, but transactors are less financially literate and slightly more risk tolerant than nonowners. We also find that the three groups of cryptocurrency owners vary by demographic and financial characteristics. Our findings highlight that transactors could be particularly financially vulnerable in the absence of consumer protections in the cryptocurrency market.
{"title":"Financial literacy, risk tolerance, and cryptocurrency ownership in the United States","authors":"Fumiko Hayashi, Aditi Routh","doi":"10.1016/j.jbef.2025.101060","DOIUrl":"10.1016/j.jbef.2025.101060","url":null,"abstract":"<div><div>Cryptocurrency owners without sufficient financial literacy and risk tolerance may be financially vulnerable, as the cryptocurrency market is highly volatile and lacks consumer protections. Our study divides cryptocurrency owners based on their purpose for holding cryptocurrencies—investment only (investors), transactions only (transactors), and a mix of investment and transactions (mix users)—and examines how each group correlates with financial literacy and risk tolerance compared to consumers who do not own cryptocurrencies (nonowners). Using the 2022 Survey of Household Economics and Decisionmaking, we find that investors and mix users are significantly or moderately more financially literate and risk tolerant than nonowners, but transactors are less financially literate and slightly more risk tolerant than nonowners. We also find that the three groups of cryptocurrency owners vary by demographic and financial characteristics. Our findings highlight that transactors could be particularly financially vulnerable in the absence of consumer protections in the cryptocurrency market.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101060"},"PeriodicalIF":4.3,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143917554","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-30DOI: 10.1016/j.jbef.2025.101059
Geul Lee , Doojin Ryu
We examine how fear of missing out (FoMO), defined as persistent anxiety that others might be enjoying valuable experiences from which one is absent, influences cryptocurrency miners’ behavior, focusing on Dogecoin (DOGE) and Litecoin (LTC). These two cryptocurrencies present a naturally developed experimental setting that allows us to investigate how FoMO-driven price fluctuations affect mining decisions without the need to account for additional variables such as mining costs. Our quantile vector autoregressive connectedness approach suggests that FoMO influences mining decisions. Returns influence DOGE-LTC mining participation more than vice versa when there are abrupt positive spikes in the DOGE price, whereas this tendency does not appear when LTC experiences price surges or when the DOGE price plunges. Given DOGE’s significantly stronger FoMO exposure, despite its other similarities to LTC, we interpret these findings as evidence that FoMO influences mining decisions.
{"title":"Fear of missing out and cryptocurrency miners: Evidence from Dogecoin and Litecoin","authors":"Geul Lee , Doojin Ryu","doi":"10.1016/j.jbef.2025.101059","DOIUrl":"10.1016/j.jbef.2025.101059","url":null,"abstract":"<div><div>We examine how fear of missing out (FoMO), defined as persistent anxiety that others might be enjoying valuable experiences from which one is absent, influences cryptocurrency miners’ behavior, focusing on Dogecoin (DOGE) and Litecoin (LTC). These two cryptocurrencies present a naturally developed experimental setting that allows us to investigate how FoMO-driven price fluctuations affect mining decisions without the need to account for additional variables such as mining costs. Our quantile vector autoregressive connectedness approach suggests that FoMO influences mining decisions. Returns influence DOGE-LTC mining participation more than vice versa when there are abrupt positive spikes in the DOGE price, whereas this tendency does not appear when LTC experiences price surges or when the DOGE price plunges. Given DOGE’s significantly stronger FoMO exposure, despite its other similarities to LTC, we interpret these findings as evidence that FoMO influences mining decisions.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101059"},"PeriodicalIF":4.3,"publicationDate":"2025-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144088805","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-25DOI: 10.1016/j.jbef.2025.101055
Ruoyu Zhu , Kehu Tan , Xiaohui Xin , Qipo Wang
Leverage manipulation refers to fraudulent behavior in which a firm deliberately lowers its book leverage through various accounting techniques to achieve a variety of objectives. However, in the era of rapid growth of fintech, can it curb this fraudulent behavior? To answer this question, we investigate the impact of fintech on corporate leverage manipulation from the perspective of capital demands. We find that fintech can inhibit corporate leverage manipulation. Mechanism analysis demonstrates that fintech weakens firms’ incentives to manipulate leverage by lowering firms’ unreasonable excessive capital demands arising from inefficient investments and the satisfaction of management’s desires. Furthermore, the inhibiting effect of fintech on corporate leverage manipulation is more pronounced in firms with high financing constraints and in tech-industries. We shed light on the latent mechanism between fintech and corporate leverage manipulation.
{"title":"Fintech and corporate leverage manipulation: A new explanation from the perspective of capital demands","authors":"Ruoyu Zhu , Kehu Tan , Xiaohui Xin , Qipo Wang","doi":"10.1016/j.jbef.2025.101055","DOIUrl":"10.1016/j.jbef.2025.101055","url":null,"abstract":"<div><div>Leverage manipulation refers to fraudulent behavior in which a firm deliberately lowers its book leverage through various accounting techniques to achieve a variety of objectives. However, in the era of rapid growth of fintech, can it curb this fraudulent behavior? To answer this question, we investigate the impact of fintech on corporate leverage manipulation from the perspective of capital demands. We find that fintech can inhibit corporate leverage manipulation. Mechanism analysis demonstrates that fintech weakens firms’ incentives to manipulate leverage by lowering firms’ unreasonable excessive capital demands arising from inefficient investments and the satisfaction of management’s desires. Furthermore, the inhibiting effect of fintech on corporate leverage manipulation is more pronounced in firms with high financing constraints and in tech-industries. We shed light on the latent mechanism between fintech and corporate leverage manipulation.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101055"},"PeriodicalIF":4.3,"publicationDate":"2025-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143902150","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-24DOI: 10.1016/j.jbef.2025.101056
Tony Xiaochi Zhang , Alexander Molchanov , Harvey Nguyen , Mia Hang Pham
Businesses are expected to operate as responsible corporate entities, with employee safety serving as a cornerstone of this responsibility. Executives, as corporate leaders, bear moral and ethical obligations to ensure the well-being of their workforce. Drawing on human capital and upper echelons theories, we examine the influence of executives' transferable skills on workplace safety outcomes. We find that chief executive officers (CEOs) with general managerial human capital significantly contribute to the creation of safer work environments. The relation is more pronounced in firms facing financing constraints or intense market competition. These CEOs improve safety outcomes by making more prudent labor investment decisions, reducing employee workloads, and maintaining high information quality. Overall, our study underscores the pivotal role of CEOs' general managerial human capital in promoting employee well-being and mitigating the potential adverse consequences of occupational hazards on firm performance. JEL classification: J28; M12; M54
{"title":"Leading safely: The impact of generalist CEOs on workplace safety","authors":"Tony Xiaochi Zhang , Alexander Molchanov , Harvey Nguyen , Mia Hang Pham","doi":"10.1016/j.jbef.2025.101056","DOIUrl":"10.1016/j.jbef.2025.101056","url":null,"abstract":"<div><div>Businesses are expected to operate as responsible corporate entities, with employee safety serving as a cornerstone of this responsibility. Executives, as corporate leaders, bear moral and ethical obligations to ensure the well-being of their workforce. Drawing on human capital and upper echelons theories, we examine the influence of executives' transferable skills on workplace safety outcomes. We find that chief executive officers (CEOs) with general managerial human capital significantly contribute to the creation of safer work environments. The relation is more pronounced in firms facing financing constraints or intense market competition. These CEOs improve safety outcomes by making more prudent labor investment decisions, reducing employee workloads, and maintaining high information quality. Overall, our study underscores the pivotal role of CEOs' general managerial human capital in promoting employee well-being and mitigating the potential adverse consequences of occupational hazards on firm performance. JEL classification: J28; M12; M54</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101056"},"PeriodicalIF":4.3,"publicationDate":"2025-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143903878","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-20DOI: 10.1016/j.jbef.2025.101054
Qianqian Feng , Yiran Shen , Jianping Li , Xiaolei Sun
This paper reviews six major epidemic outbreaks of the COVID-19 pandemic in China, with a particular focus on downside risk transmission among industry stock indices. Utilizing 136 Wind industry stock indices, this paper constructs marginal spillover networks and extracts transmission pathways during each outbreak, summarizing the risk accumulation and transmission characteristics. Empirical research findings indicate that during the outbreak of the pandemic, market downside risk initially spread in the healthcare sector and related industries such as pharmaceutical retail, life science tools and service. Due to the dual nature of silver as a crucial industrial raw material and a financial instrument, the silver index is more sensitive to the impact of the pandemic than is the gold index. Additionally, owing to variations in functional orientation and industry characteristics across cities, there are differences in downside risk spillovers among stock market industries following the outbreak of the pandemic.
{"title":"Inter-industry risk spillovers in the Chinese stock market under epidemic outbreaks","authors":"Qianqian Feng , Yiran Shen , Jianping Li , Xiaolei Sun","doi":"10.1016/j.jbef.2025.101054","DOIUrl":"10.1016/j.jbef.2025.101054","url":null,"abstract":"<div><div>This paper reviews six major epidemic outbreaks of the COVID-19 pandemic in China, with a particular focus on downside risk transmission among industry stock indices. Utilizing 136 Wind industry stock indices, this paper constructs marginal spillover networks and extracts transmission pathways during each outbreak, summarizing the risk accumulation and transmission characteristics. Empirical research findings indicate that during the outbreak of the pandemic, market downside risk initially spread in the healthcare sector and related industries such as pharmaceutical retail, life science tools and service. Due to the dual nature of silver as a crucial industrial raw material and a financial instrument, the silver index is more sensitive to the impact of the pandemic than is the gold index. Additionally, owing to variations in functional orientation and industry characteristics across cities, there are differences in downside risk spillovers among stock market industries following the outbreak of the pandemic.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101054"},"PeriodicalIF":4.3,"publicationDate":"2025-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143864339","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-19DOI: 10.1016/j.jbef.2025.101050
Ngan Hoang Vu , Ha V. Dang , Hung T. Nguyen , Mia Hang Pham
Motivated by the roles of corporate management in shaping corporate decisions and the importance of stock liquidity in financial markets, we examine whether trust in management influences the liquidity costs of the firm that they manage. Using manually collected propriety data from several datasets, this study documents that firms led by ex-military CEOs are associated with higher stock market liquidity than firms run by non-military CEOs. Military CEOs influence stock liquidity by improving their firms’ information environment and reducing performance volatility. Firms led by military CEOs have higher social capital, higher levels of voluntary disclosure, fewer stock price delays, and lower levels of informed trading. In addition, firms run by military CEOs have lower costs of capital and default risk. Overall, consistent with behavioral consistency theory, our findings highlight the importance of executives’ early-life experience in reducing information frictions, fostering trust, and improving secondary market quality.
“I think of all the time I spent in the military and in law enforcement and the many times I saw someone do the right thing because it was the right thing to do. The essence of integrity is what you do in and of yourself — you must be true to yourself.”
---Patrick O’Toole, Director & Executive Vice President, HealthMarkets Insurance Agency.
{"title":"Upholding integrity: The influence of executives’ backgrounds on corporate information environment","authors":"Ngan Hoang Vu , Ha V. Dang , Hung T. Nguyen , Mia Hang Pham","doi":"10.1016/j.jbef.2025.101050","DOIUrl":"10.1016/j.jbef.2025.101050","url":null,"abstract":"<div><div>Motivated by the roles of corporate management in shaping corporate decisions and the importance of stock liquidity in financial markets, we examine whether trust in management influences the liquidity costs of the firm that they manage. Using manually collected propriety data from several datasets, this study documents that firms led by ex-military CEOs are associated with higher stock market liquidity than firms run by non-military CEOs. Military CEOs influence stock liquidity by improving their firms’ information environment and reducing performance volatility. Firms led by military CEOs have higher social capital, higher levels of voluntary disclosure, fewer stock price delays, and lower levels of informed trading. In addition, firms run by military CEOs have lower costs of capital and default risk. Overall, consistent with behavioral consistency theory, our findings highlight the importance of executives’ early-life experience in reducing information frictions, fostering trust, and improving secondary market quality.</div><div>“I think of all the time I spent in the military and in law enforcement and the many times I saw someone do the right thing because it was the right thing to do. The essence of integrity is what you do in and of yourself — you must be true to yourself.”</div><div>---Patrick O’Toole, Director & Executive Vice President, HealthMarkets Insurance Agency.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101050"},"PeriodicalIF":4.3,"publicationDate":"2025-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143864338","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-18DOI: 10.1016/j.jbef.2025.101053
Long Chen , June Woo Park , Albert Tsang , Xiaofang Xu
Left-handers represent a notable portion of the global population, yet their characteristics remain somewhat enigmatic. One key question is whether they are inherently more creative than their non-left-handed counterparts. Our study addresses this question by examining how firm innovation varies with the handedness of their CEOs. Using a novel sample of left-handed CEOs, we find that they tend to have greater innovation success than their counterparts. Using forced turnover as an exogenous shock, we conduct a CEO handedness change analysis and find that firms transitioning from a right-handed to a left-handed CEO tend to have more patents and citations, but not vice versa. We also identify a possible mechanism for this effect: left-handed CEOs tend to hire more immigrant inventors or serve as inventors themselves, which likely enhances the firm’s innovation output. Overall, our study highlights CEO handedness as an observable personal characteristic that could serve as a predictor of a firm’ creativity.
{"title":"The puzzle of left-handedness: Evidence from corporate innovation","authors":"Long Chen , June Woo Park , Albert Tsang , Xiaofang Xu","doi":"10.1016/j.jbef.2025.101053","DOIUrl":"10.1016/j.jbef.2025.101053","url":null,"abstract":"<div><div>Left-handers represent a notable portion of the global population, yet their characteristics remain somewhat enigmatic. One key question is whether they are inherently more creative than their non-left-handed counterparts. Our study addresses this question by examining how firm innovation varies with the handedness of their CEOs. Using a novel sample of left-handed CEOs, we find that they tend to have greater innovation success than their counterparts. Using forced turnover as an exogenous shock, we conduct a CEO handedness change analysis and find that firms transitioning from a right-handed to a left-handed CEO tend to have more patents and citations, but not vice versa. We also identify a possible mechanism for this effect: left-handed CEOs tend to hire more immigrant inventors or serve as inventors themselves, which likely enhances the firm’s innovation output. Overall, our study highlights CEO handedness as an observable personal characteristic that could serve as a predictor of a firm’ creativity.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101053"},"PeriodicalIF":4.3,"publicationDate":"2025-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143855830","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-15DOI: 10.1016/j.jbef.2025.101051
Te Bao , Brice Corgnet , Nobuyuki Hanaki , Katsuhiko Okada , Yohanes E. Riyanto , Jiahua Zhu
We compare the performance of financial professionals (CFAs) with university students in four financial forecasting tasks ranging from simple lab prediction tasks to longitudinal field prediction tasks. Although students and professionals performed similarly in the most artificial forecasting tasks, CFAs outperformed students in the field predictions. Differences in forecasting performance between finance professionals and students were explained by financial literacy, not cognitive ability.
{"title":"Financial forecasting in the lab and the field: Qualified professionals vs. smart students","authors":"Te Bao , Brice Corgnet , Nobuyuki Hanaki , Katsuhiko Okada , Yohanes E. Riyanto , Jiahua Zhu","doi":"10.1016/j.jbef.2025.101051","DOIUrl":"10.1016/j.jbef.2025.101051","url":null,"abstract":"<div><div>We compare the performance of financial professionals (CFAs) with university students in four financial forecasting tasks ranging from simple lab prediction tasks to longitudinal field prediction tasks. Although students and professionals performed similarly in the most artificial forecasting tasks, CFAs outperformed students in the field predictions. Differences in forecasting performance between finance professionals and students were explained by financial literacy, not cognitive ability.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101051"},"PeriodicalIF":4.3,"publicationDate":"2025-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143851332","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-04-11DOI: 10.1016/j.jbef.2025.101052
Markus J. Rieder
We attribute varying returns in a trading market to heterogeneously informed investors. A general framework to model asymmetric information is proposed and shown to result in closed-form solutions to problems that have not been solved analytically, including risk and return profiles across various information states. Under a non-cumulative, noise-free information gathering regime, we derive an analytic expression for expected returns that aligns with economic intuition. When noise is added, we observe an increase in market efficiency, contrary to the belief that such an improvement is achievable solely through valuable information. Assuming cumulative information gathering, we derive analytic return profiles that were previously obtained only through simulations or observed in market experiments.The proposed model for returns in closed trading markets may serve as a general framework for analyzing any kind of information distribution. It also challenges market efficiency since, without any additional assumptions on risk or utility, performance differences arise solely from heterogeneously informed investors.
{"title":"How heterogeneous information induces market inefficiencies","authors":"Markus J. Rieder","doi":"10.1016/j.jbef.2025.101052","DOIUrl":"10.1016/j.jbef.2025.101052","url":null,"abstract":"<div><div>We attribute varying returns in a trading market to heterogeneously informed investors. A general framework to model asymmetric information is proposed and shown to result in closed-form solutions to problems that have not been solved analytically, including risk and return profiles across various information states. Under a non-cumulative, noise-free information gathering regime, we derive an analytic expression for expected returns that aligns with economic intuition. When noise is added, we observe an increase in market efficiency, contrary to the belief that such an improvement is achievable solely through valuable information. Assuming cumulative information gathering, we derive analytic return profiles that were previously obtained only through simulations or observed in market experiments.The proposed model for returns in closed trading markets may serve as a general framework for analyzing any kind of information distribution. It also challenges market efficiency since, without any additional assumptions on risk or utility, performance differences arise solely from heterogeneously informed investors.</div></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":"46 ","pages":"Article 101052"},"PeriodicalIF":4.3,"publicationDate":"2025-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143829385","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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