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

Last registered on March 21, 2025
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Pre-Trial

Trial Information

General Information

Title
Second Follow-Up Study on "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market?"
RCT ID
AEARCTR-0015580
Initial registration date
March 17, 2025

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
March 21, 2025, 9:59 AM EDT

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

Locations

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Primary Investigator

Name
Vincenzo Pezone
Affiliation
Tilburg University
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Other Primary Investigator(s)

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

Status
In development
Start date
2025-03-18
End date
2025-05-31
Keywords
Behavior, Finance & Microfinance
Additional Keywords
Extrapolation bias, predictions, teams
JEL code(s)
G41, G10
Secondary IDs
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 a second follow-up of a pre-registered experiment by the same team of researchers, where we use a different process for the time series of the stock return (see Barahona et al., 2024a; our first follow-up study is Barahona et al., 2024b).

References

Barahona, Ricardo et al. 2024a. "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

Barahona, Ricardo et al. 2024b. "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
External Link(s)

Registration Citation

Citation
Barahona, Ricardo et al. 2025. "Second Follow-Up Study on "Do Teams Alleviate or Exacerbate the Extrapolation Bias in the Stock Market?"." AEA RCT Registry. March 21. https://doi.org/10.1257/rct.15580-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
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.
There are two treatment arms. In the first arm, participants make predictions individually. In the second arm, participants are randomly paired and communicate via a chat box to agree on a joint decision. They are compensated based on the accuracy of their predictions.
We will test how the tendency to rely on the most recent realization to make predictions varies between the different treatments.
Participants are then presented with a survey and asked to respond some demographic questions.
Intervention Start Date
2025-03-18
Intervention End Date
2025-05-31

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.
There are two treatment arms. In the first arm, participants make predictions individually. In the second arm, participants are randomly paired and communicate via a chat box to agree on a joint decision. They are compensated based on the accuracy of their predictions.
Participants are then presented with a survey and 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.
Note: This is a second follow-up on Barahona et al. (2024a), prompted by a referee's request. Relative to the original design, we plan to adopt a different process for the time series of stock returns (with higher persistence). In addition, we have limited the number of treatment arms (the original study also had a third arm) and slightly increased the sample size due to power considerations.
Experimental Design Details
Not available
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
900
Sample size: planned number of observations
900
Sample size (or number of clusters) by treatment arms
300 for the first arm
600 for the second arm
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
2025-03-17
IRB Approval Number
EXE 2024-015 A2
Analysis Plan