New paper in Experimental Economics

posted Nov 11, 2019, 5:12 AM by Stefan Palan   [ updated Nov 11, 2019, 5:18 AM ]

Cover of Experimental Economics
The term "wisdom of crowds" is well-recognized at least since the publication of James Surowiecki's book with the same title. It refers to the phenomenon that the aggregated estimates of many different individuals often constitute a surprisingly accurate predictor of the unknown quantity or quality to be estimated. In our latest paper, co-authored with Jürgen Huber and Larissa Senninger from the University of Innsbruck, I study which aggregation mechanism performs best. We compare simple means and medians and more complex, market-based mechanisms. We find that the continuous double auction outperforms all other mechanisms in terms of prediction accuracy.

Palan, S., Huber, J., Senninger, L., Forthcoming. Aggregation mechanisms for crowd predictions, Experimental Economics, DOI: 10.1007/s10683-019-09631-0.

New paper in Journal of Banking and Finance

posted Sep 16, 2019, 3:51 AM by Stefan Palan   [ updated Sep 29, 2019, 11:58 PM ]

Cover, Journal of Banking and Finance
What do investors perceive as risky? And if what they perceive as being risky differs from what finance theory suggests constitues risk - does the market eliminate any potential biases from individual risk perceptions? These are the core questions pursued in a joint paper with Jürgen Huber and Stefan Zeisberger and recently 
published (online first) in the Journal of Banking and Finance. Titled "Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence", the paper finds that investors nearly exclusively focus on an asset's probabilty of yielding negative returns. In other words, risk perception is driven by the probability of losses, while for example the size of the potential losses does not seem to receive investors' attention.

While this result confirms prior research by some of the authors, finance theorists would rely on a market to eliminate any individual biases, yielding efficient prices, which properly reflect more comprehensive risk measures. Yet the paper's most important finding is precisely that this mechanism does not work. The results show that real-money experimental asset market prices fully reflect the individual risk perceptions. Assets with a higher probability of negative returns fetch lower prices in the market and vice versa. This has important implications for markets outside of the lab, for individual investors, and for investment advisors, who should account for this bias.

Huber, J., Palan, S., Zeisberger, S., 2019. Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence, Journal of Banking & Finance 108(105635)., DOI 10.1016/j.jbankfin.2019.105635.

See also:

New paper in Journal of Economic Dynamics and Control

posted Jul 18, 2019, 12:05 AM by Stefan Palan   [ updated Jul 18, 2019, 12:06 AM ]

JEDC cover
A joint paper with Marcus Giamattei, Jürgen Huber, Johann Graf Lambsdorff and Andreas Nicklisch, titled "
Who inflates the bubble? Forecasters and traders in experimental asset markets", has recently been published (online first) in the Journal of Economic Dynamics and Control. It experimentally studies the interaction of traders and analysts and teases apart their respective roles in producing bubble patterns. We find the greatest bubbles in settings where the roles of trader and analyst are clearly separated, with traders trying to maximize their trading profit and analysts being paid for their forecasting accuracy.


posted Apr 3, 2019, 2:07 PM by Stefan Palan   [ updated Aug 3, 2019, 1:00 PM ]

The University of Graz has elected a new senate in which I will serve as a senator from October 2019. I look forward to this new challenge and to working for my alma mater in this new capacity!

Funding for research into post-earnings-announcement drift

posted Mar 21, 2019, 3:51 AM by Stefan Palan   [ updated Mar 21, 2019, 3:55 AM ]

The Austrian Science Fund (FWF) has decided to fund my joint grant application with Erik Theissen, titled "Experiments on the Post-Earnings-Announcement Drift". In this research proposal, we plan to study the causes and mechanisms behind the phenomenon that stock prices tend to drift upward (downward) over extended periods of time following positive (negative) earnings news. Given the funding now granted, my team and I will be able to hire a PhD student to conduct experiments to explore several potential explanations for why post-earnings-announcement drift occurs.

Annual report of research platform

posted Feb 5, 2019, 6:37 AM by Stefan Palan   [ updated Feb 5, 2019, 6:37 AM ]

Annual report cover page
Our research platform FiRe has just published its annual report. We had a very productive year and report on a lot of research activity, including new initiatives like a public lecture series, the FiRe lecture.

Video illustration of recent paper

posted Dec 17, 2018, 3:24 AM by Stefan Palan   [ updated Dec 17, 2018, 3:26 AM ]

My recently published paper, 'Immaterial and monetary gifts in economic transactions: evidence from the field', has now been made more accessible to the interested scientific community and the general public by ways of a Youtube video. Created by the University of Innsbruck group around my co-author Michael Kirchler, the video shows how being nice to the salesperson (by giving a compliment, or tipping while ordering) nets customers more ice cream or heavier Durum Doner. Check it out below!

ProSieben Galileo report

posted Dec 17, 2018, 3:19 AM by Stefan Palan

I recently had my eleven minutes of fame when I featured in a report in ProSieben's (a TV station) Galileo magazine. Galileo presents news from the realm of science and technology to a general audience of between 1m and 2m German-speaking viewers. In this case, we did a little experiment to explore which 'tricks' a waiter can use to earn larger tips. See for yourself how that worked out! Link to the video:

Coin photo by Steve Johnson and Unsplash

New GIMS version

posted Oct 22, 2018, 2:25 PM by Stefan Palan

I have just posted the latest version of my free, open-source asset pricing program GIMS. Version 8.2.1 now runs on the latest z-Tree version (4.1.5) which should hopefully give it significantly enhanced performance (I have yet to test it with a full lab.)

And since it is so nice, I also want to share with you the first Japanese GIMS implementation I have seen. My thanks for the screenshot to Takao Kusakawa!

GIMS screenshot in Japanese

Successful grant application

posted Jul 27, 2018, 7:19 AM by Stefan Palan   [ updated Jul 27, 2018, 7:21 AM ]

A joint grant application by Thomas Stöckl (MCI Management Center Innsbruck, serving as principal investigator) and myself has received funding by the Austrian National Bank (OeNB). Titled Putting a spotlight on insider trading legislation - A cross-examination using laboratory markets, the research project consists of three separate studies of insider trading and the effect of legislation. Specifically, they focus on the effect on the possibility to short sell on informed and uninformed traders' behavior and profits, on traders' choice of a regulated vs. a non-regulated market, and on whether traders themselves would vote for legislation against informed trading or not.

Funded with € 147,000, the project will run for three years and will bring together pre- and post-doc researchers in Graz and Innsbruck.

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