Social Influence on Predictions of Simulated Stock Prices: Research report from Sustainable Investments
In two experimental simulations of a financial market participants predicted the future price of a stock given the current price and the predictions made by five fictitious others.
Experiment 1, employing 96 undergraduates, showed an influence of the others´ predictions when these were correlated. In Experiment 2, employing another 72 undergraduates, the influence increased with the number of other´s correlated predictions. Since the others´ predictions lacked predictive validity and the influence increased with the number of others, the results indicate that the operation of a consensus heuristic may account for herd influences on stock price predictions. Download the paper Social Influence on Predictions of Simulated Stock Prices here (pdf, 100 kB)
