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Stock Valuation and Price Anchoring

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December 20, 2013 – Comments (3)

Thanks for participating in my Stock Valuation Contest.

If you were interested in what my study was about, I was curious about the role stock prices have in affecting investment decisions, a general phenomenon referred to as anchoring. I wanted to know to what extent investors were affected by anchoring and whether or not anchoring bias could be overcome.

For details on the study see here:

Stock Valuation and Anchoring: AF2P Contest Results

3 Comments – Post Your Own

#1) On December 20, 2013 at 12:37 PM, Mega (99.96) wrote:

Dang, tough group. Looks like I would have won A or B.

So people gave up on B at a much higher rate than C? Maybe some of them were confused about how the contest would judge intrinsic value, without the comment on anchoring. That comment made me assume it was a made up number, which I might not have assumed otherwise.

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#2) On December 21, 2013 at 11:05 AM, rd80 (98.29) wrote:

Very interesting research.

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#3) On December 21, 2013 at 4:29 PM, somrh (86.39) wrote:

@Mega

Yeah, there were a few that came pretty close in Group C. A nine cent difference is hard to beat. 

For some odd reason, about 37% were assigned to Group C. So that may have been a factor for why there were more in C than in other two. I don't know why so few participated in Group B. But I guess that's how the dice rolls. 

Regarding the made-up number aspect, I had wondered if one could argue (assuming a difference between Groups B and C was found) that people in Group B didn't think the price was made up so they used that as a reflection of market opinion (good prospects versus not good prospects) in absense of additional information. 

Either way, I'm going to have to pay less attention to the prices of stocks I'm interested in :)

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