Follow-Up Study on "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market"?

Last registered on December 03, 2024
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Pre-Trial

Trial Information

General Information

Title
Follow-Up Study on "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market"?
RCT ID
AEARCTR-0014914
Initial registration date
November 30, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
December 03, 2024, 1:39 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
United States of America
Region

Primary Investigator

Name
Vincenzo Pezone
Affiliation
Tilburg University
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Stefano Cassella
PI Affiliation
Tilburg University
PI Name
Ricardo Barahona
PI Affiliation
Banco de Espana
PI Name
Kristy Jansen
PI Affiliation
University of Southern California

Additional Trial Information

Status
In development
Start date
2024-11-30
End date
2024-12-31
Keywords
Behavior, Finance & Microfinance
Additional Keywords
JEL code(s)
G41, G10
Secondary IDs
Extrapolation bias, predictions, teams
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Investors have been found to attribute an excessive role to more recent return realizations when making predictions, even though at low to medium horizons stock returns exhibit little autocorrelation. This tendency is known as “extrapolation bias.” Using an online survey, we test whether team interaction mitigates or amplifies such a bias.

Note. This is an additional arm of a pre-registered experiment by the same team of researchers, where we test for a potential "selection channel" in team decision making (see Barahona et al., 2024).

References

Barahona, Ricardo et al. 2024. "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market?." AEA RCT Registry. May 30. https://doi.org/10.1257/rct.13710-1.0
External Link(s)

Registration Citation

Citation
Barahona, Ricardo et al. 2024. "Follow-Up Study on "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market"?." AEA RCT Registry. December 03. https://doi.org/10.1257/rct.14914-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Teams of two randomly paired respondents are presented with a series displaying the past realizations of a hypothetical stock return. They are then asked to predict the next realization in the series. Once they make the prediction, the actual realization is displayed, and they are asked to predict the next realization. The task is repeated twenty times.
The team prediction is determined as described below, and the compensation is based on the accuracy of the predictions.
Participants are then presented with a survey and asked to respond to some demographic questions.
Intervention (Hidden)
Participants are recruited via Prolific and the survey is administered via Labvanced. The experiment is a variation over the set-up of Afrouzi et al. (QJE, 2022), with the difference that some of the participants are allowed to interact in a team setting.
Intervention Start Date
2024-11-30
Intervention End Date
2024-12-31

Primary Outcomes

Primary Outcomes (end points)
Stock return forecasts
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Respondents are presented with a series displaying the past realizations of a hypothetical stock return. They are then asked to predict the next realization in the series. Once they make the prediction, the actual realization is displayed, and they are asked to predict the next realization. The task is repeated twenty times.
Participants are randomly paired in two-person teams and have to make a joint prediction at each step.
The joint prediction is determined as follows. Participants first make a prediction, and are then asked to submit a "vote." The prediction of the participant who submits the most votes is then selected as the team prediction.
Participants are then presented with a survey and are asked to respond some demographic questions.
The purpose of this experiment is to test how the tendency to rely on the most recent realization to make predictions varies between the different treatments.
Experimental Design Details
Randomization Method
Randomization done in office by a computer
Randomization Unit
Unit
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
500
Sample size: planned number of observations
500
Sample size (or number of clusters) by treatment arms
500
Note: This study follows up on Barahona et al. (2024), where we have already collected approximately 1,250 observations across three (other) experimental arms. We will integrate the original dataset with these newly collected observations.

References

Barahona, Ricardo et al. 2024. "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market?." AEA RCT Registry. May 30. https://doi.org/10.1257/rct.13710-1.0
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Institutional Review Board at Tilburg University
IRB Approval Date
2024-11-25
IRB Approval Number
EXE 2024-015 A1
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials