General instructions
This experiment comprises two subsequent stages.
In both parts, you will have to make a series of choices between investing into either a stock or bond.
For each choice, you have up to 120 seconds to decide.
If you do not make a choice after 120 second, you will automatically invest into the bond.
Contingent on your choice, you earn monetary units. The number of units you earn in every decision is summed up at the end of the experiment.
For every monetary unit you have earned, you are paid 3 Euro-Cents. In addition, you receive a participation fee of 2 Euros.
Example 1: Assume you earn 400 monetary units in the experiment. Your ultimate income in the experiment, which you are paid out, equals: 280*0.03 + 2 = 10.40 Euros.
Example 2: Assume you earn 250 monetary units in the experiment. Your ultimate income in the experiment, which you are paid out, equals: 220*0.03 + 2 = 8.60 Euros.
Please make your decisions carefully as they determine your ultimate income that you receive at the end of the experiment.
The use of any decision support which is not provided on screen is strictly forbidden.
Note: At every point, the experiment can only continue once all participants have made their decision!
Specific instructions stage 1
You participate in 7 asset market games. Each game consists of consecutive 5 rounds.
In every round, there are two assets in which you can invest. On the one hand,
there is a bond that is always paying 3 monetary units for certain. On the other hand,
there is a stock which is either paying 1 or 5 monetary units. In every round, your task is to choose whether
you want to invest into the bond or the stock.
The probability that an investment into the stock yields the high payoff (5 units),
depends on the risky assets fundamental state of this asset.
With an equal probability (50%/50%), the fundamental state can either be good, or bad.
Good state: If the stock is in a good state, the probability for the high payoff equals 70%.
This is, with a chance of 70% you receive the payoff of 5, and with 30% you receive the payoff of 1.
Bad state: If the stock is in a bad state, the probability for the high payoff equals 30%.
This is, with a chance of 30% you receive the payoff of 5, and with 70% you receive the payoff of 1.
In every round, before you make your decision, you receive independent opinions of 4 experts about the stock’s payoff in the given round.
Each expectation can either say High Payoff, or Low Payoff, indicating the expert’s expectation about the stock’s payoff in this round.
The expectations can be correct or incorrect and correlate with the stock’s actual payoff in a certain way.
If you have figured out the underlying patterns, the expectations can help you identify when the stock will yield a high payoff.
Results and a history of the experts’ opinions, and the actual payoff of the stock of previous rounds is shown in every market game.
To make sure that you have understood your task, there will be two trial rounds of decision making with feedback. Your decisions and outcomes in trial rounds do not affect your payoff.
In this trial, you have unlimited time to get familiar with the task.
NOTE: The underlying relation between expert expectations and stock payoff are different from those in subsequent payoff relevant rounds.