The Price of Luck

26 Pages Posted: 9 Jan 2015

See all articles by Sílvia Ysas

Sílvia Ysas

Autonomous University of Barcelona - Department of Business Economics

Magda Cayón

Universitat Autònoma de Barcelona

Jordi Brandts

Instituto de Analisis Economico (CSIC) Barcelona

Pablo Guillén

The University of Sydney

Date Written: June 9, 2013

Abstract

We find that the vast majority of students taking an advanced undergraduate finance course show a preference for luck in a classroom experiment. In Phase I of the experiment part of the students, group A, were asked to guess a coin toss five times in a row. In Phase II the rest of the students, group B, were given 10 EUR to bet on some of the Group A students taking a second go at guessing a sequence of five coin tosses (Phase III). Group B students’ bets were by default allocated to the worse performing student in Phase I. Switching to better performing Group A students was costly. A total of 23 out of 28 students were willing to pay for switching and thus showed a preference for luck.

Keywords: Decision heuristics, hot hand fallacy, experiments

JEL Classification: C90, G02, G11

Suggested Citation

Ysas, Sílvia and Cayón, Magda and Brandts, Jordi and Guillén, Pablo, The Price of Luck (June 9, 2013). Available at SSRN: https://ssrn.com/abstract=2547421 or http://dx.doi.org/10.2139/ssrn.2547421

Sílvia Ysas (Contact Author)

Autonomous University of Barcelona - Department of Business Economics ( email )

Edifici B - Campus de la UAB
Bellaterra (Cerdanyola del Vallès)
Barcelona, Barcelona 08193
Spain

Magda Cayón

Universitat Autònoma de Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain
+34935814302 (Phone)
+34935812555 (Fax)

Jordi Brandts

Instituto de Analisis Economico (CSIC) Barcelona ( email )

UAB Campus
E-08193 Bellaterra
Spain

Pablo Guillén

The University of Sydney

University of Sydney
Sydney, NSW 2006
Australia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
78
Abstract Views
1,318
Rank
559,655
PlumX Metrics