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Animal spirits in financial markets: Experimental evidence

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  • Ilomäki, Jukka
  • Laurila, Hannu

Abstract

The paper presents an experiment of stock market pricing that aims to test, whether animal spirits affect the price setting. In the experiment, the task of the subjects was to forecast the equilibrium price for the next period under differentiated information. The statistical analysis shows that animal spirits affect significantly the forecasting behavior of both informed and uninformed subjects. Furthermore, the animal spirits component reduces the realized cumulative returns for the informed subjects, and increases the realized cumulative returns for the uninformed subjects.

Suggested Citation

  • Ilomäki, Jukka & Laurila, Hannu, 2018. "Animal spirits in financial markets: Experimental evidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 20(C), pages 99-104.
    • Handle: RePEc:eee:beexfi:v:20:y:2018:i:c:p:99-104
    DOI: 10.1016/j.jbef.2018.08.005
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    Cited by:

    1. Jukka Ilomäki & Hannu Laurila, 2021. "Leaning against the wind policy and animal spirits in a general equilibrium model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2325-2334, April.

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    More about this item

    Keywords

    Experiment; Stock returns; Portfolio choice; Forecasting behavior; Animal spirits;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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