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In this experiment,you will shortly be asked to choose between two companies to invest in. You will have a stake in the earnings of your chosen company.
Your final payment will be based on the earnings per share(EPS)performance of your chosen investment relative to your investment position. Your investment position is similar to that of an investor taking a long position. This means that the higher the performance of your chosen company,the better off you are. In determining your payment, your invested company's actual EPS will be assessed relative to the consensus analysts' forecast. More specifically:
You will-
Receive $0.20 for every l cent that your invested company's actual EPS is higher than the consensus analysts' forecast for Year 20X3.
Lose $0.20 for every l cent that your invested company's actual EPS is lower than the consensus analysts' forecast for Year 20X3.
Note: there is a cap of $8.00 on the amount that you could earn or lose.
You will also be asked to provide an EPS forecast for your chosen investment for the Year 20X3.If your EPS forecast is the closest to the actual EPS for the Year 20X3 out of all other participants in this study, you will win a prize of $30.
In summary, your final payment comprises the following:
(a) A base payment of $16 for completing the experiment;
(b) A payment adjustment (added to or deducted from the base payment) depending on your chosen company's actual EPS relative to the consensus analysts' forecast-the higher the relative performance, the higher your final pay amount and vice versa(Note: this payment adjustment amount is capped at $8.00);
(c) An additional payment of $30 if your EPS forecast for your chosen company is the most accurate compared to actual EPS out of all participants(Note: If two or more participants are equally most accurate, a random draw would determine the winner).
You will also be asked to provide an EPS forecast for your chosen investment for the Year 20X3.If your EPS forecast is the closest to the actual EPS for the Year 20X3 out of all other participants in this study, you will win a prize of $30.
In summary, your final payment comprises the following:
(a) A base payment of $16 for completing the experiment;
(b) A payment adjustment (added to or deducted from the base payment) depending on your chosen company's actual EPS relative to the consensus analysts' forecast-the higher the relative performance, the higher your final pay amount and vice versa(Note: this payment adjustment amount is capped at $8.00);
(c) An additional payment of $30 if your EPS forecast for your chosen company is the most accurate compared to actual EPS out of all participants(Note: If two or more participants are equally most accurate, a random draw would determine the winner).