Experiments are an underused method in finance and have natural advantages for behavioral finance. Experiments can provide a useful means to circumvent several common econometric issues such as omitted variables, unobserved variables, and self-selection. Experiments can extend the theoretical...

We use a laboratory experiment to study the extent to which investors‘ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors...

We report results from an asset market experiment, in which we investigate how the time path of the fundamental value trajectory affects the level of adherence to fundamentals. In contrast to previous experiments with long-lived assets, there is a phase in which fundamental values are constant...

This paper investigates the impact of socially responsible investment on individuals’ risk taking behavior and portfolio rebalancing decisions. We find that concerns for social responsibility do not impact stock market participation and willingness to take risk but simply alter individuals’...

We create an experimental asset market in which we conduct share repurchases and share issues. Although the intrinsic value of the shares is independent of the quantity outstanding, the interventions result in changes in asset price. Specifically, we find the following. (1) A repurchase of...

We examine how the presentation of investment results affects risk taking using an experiment in which participants view results either asset by asset or aggregated into a portfolio result. Our experiment examines the investment choices of a nationwide sample of 249 participants in a simulation...

We study a natural experiment in which 1.5 million investors participate in allocation lotteries for Indian IPO stocks. Investors who win the lottery and obtain IPO stocks that rise in value increase portfolio trading volume in non-IPO stocks relative to lottery losers; the effects are negative...

The underpricing of initial public offerings is a well-documented fact of empirical equity market research. Theories explain this underpricing with market imperfections. We study three empirically relevant IPO mechanisms under almost perfect market conditions in the laboratory: a stylized book...

We investigate whether the quantitative frame used to communicate future pension income to plan members matters for perceived pension income adequacy. We allocate plan members randomly to one of four pension income framing conditions: annual pension income, monthly pension income, pension income...