Determinants of risk-taking in experimental asset markets.

Abstract

This thesis examines the effects of biases on investment decisions and risky asset prices using laboratory asset markets. A bias is a systematic error in decision-making and can be caused by many factors. In contrast to unsystematic errors, biases affect investor behaviour directionally and do not cancel each other out. Hence, a bias can cause asset prices to deviate from fundamental values, with potentially detrimental effects for investors and economies. This thesis examines three possible sources for biased decision-making, that is, it considers bias caused:• by option-like compensation: tournament behaviour• by probability judgement error: the gambler’s fallacy• when feelings affect information processing: mood misattribution.

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