To what extent do investors in a financial market anchor their judgments? Evidence from the Hong Kong horserace betting market


Johnson, Johnnie Eric Victor, Schnytzer, Adi and Liu, Shuang (2009) To what extent do investors in a financial market anchor their judgments? Evidence from the Hong Kong horserace betting market. Journal of Behavioral Decision Making, 22, (4), 410-434. (doi:10.1002/bdm.640).

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Description/Abstract

A naturalistic study was employed to explore a new form of “basic anchoring.” In particular, we examined the degree to which decision makers in a financial market, the horserace betting market, anchored their probability judgments excessively on a factor present in the environment at the time the judgments were made and which was relevant and informative to the judgment: the advantage afforded by a horse's barrier-position (BP). The results demonstrated that under certain conditions bettors anchored excessively on BP information revealed at previous race meetings, but not on the most recent race outcomes. In fact, bettors appeared to use the most recent race outcomes appropriately when forming probability estimates; but only when the results were in line with, what were likely to be, their expectations of BP advantage. Bettors with varying levels of expertise were shown to be subject to excessive anchoring, although greater expertise was generally associated with less excessive anchoring. The paper concludes that the manner and degree of basic anchoring in real-world environments is complex.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1002/bdm.640
Additional Information: Revised August 2008
ISSNs: 0894-3257 (print)
1099-0771 (electronic)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Divisions : University Structure - Pre August 2011 > School of Management
ePrint ID: 64376
Accepted Date and Publication Date:
Status
October 2009Published
14 April 2009Made publicly available
Date Deposited: 19 Jan 2009
Last Modified: 31 Mar 2016 12:49
URI: http://eprints.soton.ac.uk/id/eprint/64376

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