Is financial instability male-driven? Gender and cognitive skills in experimental asset markets

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Title: Is financial instability male-driven? Gender and cognitive skills in experimental asset markets
Authors: Cueva, Carlos | Rustichini, Aldo
Research Group/s: Microeconomía Aplicada (GIMA)
Center, Department or Service: Universidad de Alicante. Departamento de Fundamentos del Análisis Económico
Keywords: Asset market experiment | Mispricing | Price bubbles | Gender | Cognitive ability
Knowledge Area: Fundamentos del Análisis Económico
Issue Date: Nov-2015
Publisher: Elsevier
Citation: Journal of Economic Behavior & Organization. 2015, 119: 330-344. doi:10.1016/j.jebo.2015.08.014
Abstract: The hypothesis that price stability would reliably increase with the fraction of women operating in financial markets has been frequently suggested in policy discussions. To test this hypothesis we conducted 10 male-only, 10 female-only and 10 mixed-gender experimental asset markets, and compared the effects of gender composition, confidence, risk attitude and cognitive skills. Male and female markets have comparable volatility and deviations from fundamentals, whereas mixed-gender markets are substantially more stable. On the other hand, higher average cognitive skills of the group are associated with reduced market volatility. Individual-level analysis shows that subjects with higher cognitive skills trade at prices closer to fundamental values and earn significantly higher profits; similarly, mixed markets exhibit lower mispricing, particularly for traders with lower cognitive skills. Our results are demonstrated to hold in other experimental asset market studies, suggesting that a mixed-gender composition reduces mispricing across different types of asset markets.
Sponsor: Financial support from the UK Economic and Social Research Council, the Isaac Newton Trust and the Spanish Ministerio de Economía y Competitividad (ECO2012-34928) are gratefully acknowledged.
URI: http://hdl.handle.net/10045/57928
ISSN: 0167-2681 (Print) | 1879-1751 (Online)
DOI: 10.1016/j.jebo.2015.08.014
Language: eng
Type: info:eu-repo/semantics/article
Rights: © 2015 Elsevier B.V.
Peer Review: si
Publisher version: http://dx.doi.org/10.1016/j.jebo.2015.08.014
Appears in Collections:INV - GIMA - Artículos de Revistas

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