Effect of price quoting on financial assets price: An experimental analysis

Tal Shavit, Shosh Shahrabani, Uri Benzion

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

Stock options are usually sold in bundles of 100 units, and their price can be quoted either per unit or per bundle. In this paper, the effect of different methods of quoting financial asset prices on the subjective value of a contract was examined experimentally. In particular, we examined differences in subjects' Willingness-To-Pay (WTP) and Willingness-To-Accept (WTA) for financial assets depending upon whether prices are quoted per unit or per bundle. We found that subjects bid (ask) a higher price when prices are quoted per unit than when they are quoted per bundle. The results indicated that different quoting methods affect the bidding price for risky assets. These results can have important implications for trading on financial markets.

Original languageEnglish
Title of host publicationProceedings of the 9th Joint Conference on Information Sciences, JCIS 2006
DOIs
StatePublished - 1 Dec 2006
Externally publishedYes
Event9th Joint Conference on Information Sciences, JCIS 2006 - Taiwan, ROC, Taiwan, Province of China
Duration: 8 Oct 200611 Oct 2006

Publication series

NameProceedings of the 9th Joint Conference on Information Sciences, JCIS 2006
Volume2006

Conference

Conference9th Joint Conference on Information Sciences, JCIS 2006
Country/TerritoryTaiwan, Province of China
CityTaiwan, ROC
Period8/10/0611/10/06

Keywords

  • Behavioral finance
  • Experiment
  • Myopic loss aversion
  • WTA
  • WTP

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