Security Design and Market Price Informativeness

Security Design and Market Price Informativeness (HREC 1852127.2)

Introduction

This research seeks to investigate how the payoff design of securities affects (i) individual trading behaviour and (ii) financial markets’ abilities to solve complex problems. Participants need to be between 18 and 35 years old, and to not have previously taken part in a “knapsack” (“Complex decisions”, or “Decision Pathways”) experiment with the BMM Lab.

What will I be asked to do?

Should you agree to participate, you will complete computer-based tasks. For each trial of the first task, you will be asked to solve a problem, which will involve filling a knapsack by selecting from a set of items those items that maximise the knapsack’s value. You will select items by using the mouse. At the same time, you will trade a security in an online market. There exists one tradeable security for every trial. The security’s payoff depends on the value of the optimal knapsack. Following completion of this first task, you will then be asked to perform a short interval production and complete a short questionnaire.
The estimated time of commitment will be about 180 minutes. Participation in this study is completely voluntary and the information collected will remain confidential. Your time and effort will be compensated by a cash payment partly depending on your performance in the experiment. Each participant will earn between $20 – $80 at the end of the experimental session, where payment will vary according to performance in the tasks. The average/expected payoff is $50. A participant who decides not to participate at any point in the session will be paid $10, as a show-up fee.

What are the possible benefits?

The results of this study will provide novel insights into how security design affects both human decision-making and information aggregation within financial markets in the presence of computational complexity.

What are the possible risks?

There are no material risks beyond the variation in performance-based payments.

Do I have to take part?

No. Participation is completely voluntary. You are able to withdraw at any time. Should you wish to withdraw at any stage, or withdraw any unprocessed data you have supplied, you are free to do so without prejudice, and any potential conflicts of interest arising. If you are a student of the above researchers, participating or withdrawing will not affect your grades in any way.

Will I hear about the results of this project?

Results of the study will be available from the researchers’ websites, be presented at conferences and be published in peer-reviewed journals.

What will happen to information about me?

This is an anonymous study. We will protect the confidentiality of your trading and responses to the fullest possible extent, within the limits of the law. Only participant codes will be used in storage of the data. The trading and response data will be kept securely in the Department of Finance for a minimum of five years from the date of publication.

Is there any potential conflict of interest?

Several of the researchers collaborating on this project teach subjects at the university, of which you may or may not be enrolled in, now or in the future. There will be absolutely no impact on student grades from participating in this experiment.

Where can I get further information?

If you would like more information about the project, please contact the researchers at bmm-lab@unimelb.edu.au or 03 9035 9950.

Who can I contact if I have any concerns about the project?

This research project has been approved by the Human Research Ethics Committee of The University of Melbourne. If you have any concerns or complaints about the conduct of this research project, which you do not wish to discuss with the research team, you should contact the Manager, Human Research Ethics, Research Ethics and Integrity, University of Melbourne, VIC 3010. Tel: +61 3 8344 2073 or Email: HumanEthics-complaints@unimelb.edu.au. All complaints will be treated confidentially. In any correspondence please provide the name of the research team or the name or ethics ID number of the research project.

How Do I Agree to Participate?

If you decide to participate, please sign up for an experimental session here.

Human ethics approval

This study has been approved by the University of Melbourne Human Research Ethics Committee (HREC: 1852127.2).

Brain, Mind and Markets Lab
Department of Finance
The University of Melbourne
Victoria 3010
Australia
Phone: +61 3 9035 9950