To what extent do investors in a financial market anchor their judgments? Evidence from the Hong Kong horserace betting market
To what extent do investors in a financial market anchor their judgments? Evidence from the Hong Kong horserace betting market
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.
410-434
Johnson, Johnnie Eric Victor
6d9f1a51-38a8-4011-a792-bfc82040fac4
Schnytzer, Adi
fcd3667f-6130-4bc2-a8a8-696d94d52fd9
October 2009
Johnson, Johnnie Eric Victor
6d9f1a51-38a8-4011-a792-bfc82040fac4
Schnytzer, Adi
fcd3667f-6130-4bc2-a8a8-696d94d52fd9
Johnson, Johnnie Eric Victor and Schnytzer, Adi
(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), .
(doi:10.1002/bdm.640).
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.
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e-pub ahead of print date: 14 April 2009
Published date: October 2009
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Revised August 2008
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Local EPrints ID: 64376
URI: http://eprints.soton.ac.uk/id/eprint/64376
ISSN: 0894-3257
PURE UUID: 60200a9a-5104-4ce7-b813-1f3f54099881
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Date deposited: 19 Jan 2009
Last modified: 15 Mar 2024 11:48
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Author:
Johnnie Eric Victor Johnson
Author:
Adi Schnytzer
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