Adriana Breaban
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When do structured funds become too good to be true? An experiment, forthcoming in Pacific Economic Review    
Adriana Breaban, Juan Carlos Matallín-Sáez, Iván Barreda-Tarrazona and Mª Rosario Balaguer-Franch 

Abstract: Structured funds, with different combinations of secured and additional risky benefits, are sequentially offered to university students who act as investors. In this experiment participants are also offered the alternative choice to buy bonds. Our results show that information available to investors, and particularly the order in which this information is presented, generates significant biases in their decision making. These biases can have both positive and negative consequences on investor’s financial behavior. In fact, when the investment alternatives are made easier to compare by showing the funds in increasing order of expected return, too good to be true investment offers get more easily spotted. Whereas simultaneously, when fund’s expected performance presents an apparently positive trend (also due to being sequentially shown in increasing order), funds result overvalued in comparison to bonds.
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Emotional State and Market Behavior, work in progress 
Adriana Breaban and Charles N. Noussair

Abstract: We consider the relationship between the emotional state of asset traders and market prices. We create experimental asset markets with the structure first studied by Smith, Suchanek and Williams (1988), which is known to generate price bubbles and crashes. We analyze participants' facial expressions with facereading software before and while the market is operating. We find that greater positive emotion in facial expressions before the market opens predicts higher prices and larger bubbles. Greater fear predicts lower prices and smaller bubbles. Those traders who remain the most neutral during periods of market volatility achieve the highest earnings. Loss aversion in decision making is correlated with fear, but not with other emotions.


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Fundamental Value Trajectories and Trader Characteristics in an Asset Market Experiment, submitted to European Economic Review
 Adriana Breaban and Charles N. Noussair

Abstract: We report results from an asset market experiment, in which we investigate how the time path of the fundamental value trajectory affects the level of adherence to fundamentals. In contrast to previous experiments with long-lived assets, there is a phase in which fundamental values are constant before the onset of a trend. The trend is either increasing or decreasing, depending on the treatment. We compare the level of mispricing between the decreasing and increasing fundamental value trajectories. Before the experiment begins, risk aversion, loss aversion, and cognitive reflection protocols were administered to traders. We find that there is closer adherence to fundamental values when they follow a decreasing than when they have an increasing trend. Greater average risk aversion on the part of traders in the market predicts lower market prices. The greater the level of loss aversion, the lower the quantity traded. The greater the average cognitive reflection test score, the smaller the differences between market prices and fundamental values. The variation between groups in risk aversion, loss aversion, and CRT score explains 45% of the variation in price level and in mispricing relative to fundamental between trader cohorts.
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