New working paper studying the disposition effect

posted Jul 21, 2020, 1:34 AM by Stefan Palan   [ updated Jul 21, 2020, 1:34 AM ]

I have just published a new working paper studying the disposition effect. Following a seminar presentation at the Université catholique de Louvain in October of last year, I joined the research project of Rudy De Winne and Nhung Luong, who study whether investors whose behavior exhibits the disposition effect choose different order types and different limit prices than investors less prone to the disposition effect. We are able to report strong evidence supporting this conjecture from a comprehensive analysis of a large dataset of millions of trades by thousands of Belgian retail investors. For the next version of the paper, we aim to run experiments to document causal relationships.

Short video explaining the review and publication process

posted Apr 29, 2020, 4:59 AM by Stefan Palan   [ updated Apr 29, 2020, 5:03 AM ]

Video preview
I recently looked for a short video explaining how the review and publication process works at research journals. I intended to (and did) use it to give the students in one of my courses a short primer, before discussing some referee reports with them.

I found the following video, which does the job so nicely that I decided to share it with you:

Interview by TOP-Gewinn

posted Feb 24, 2020, 3:06 AM by Stefan Palan   [ updated Feb 24, 2020, 3:06 AM ]

I was recently interviewed by Martin Maier from GEWINN, a leading Austrian business magazine. We talked about my research with Jürgen Huber and Stefan Zeisberger into the factors driving risk perception and, indirectly, prices in capital markets. Read the full interview at:

PhD student receives grant from Austrian Academy of Sciences

posted Feb 4, 2020, 2:21 PM by Stefan Palan   [ updated Feb 4, 2020, 2:21 PM ]

Logo, Austrian Academy of Sciences
The year started on a positive note when we learnt that Kerstin Mitterbacher, a PhD student of mine, was granted a 2-year DOC stipend by the Austrian Academy of Sciences. She will now be able to focus her full attention on her research in the project titled "Migration and Integration". The objective of Kerstin's work will be to show how the willingness of migrants to integrate into the society of their destination countries and the willingness of destination country citizens to welcome such migration and integration interact, and which factors promote successful outcomes. Kerstin will run laboratory experiments at the University of Graz' Max Jung Lab together with Jürgen Fleiß and myself.

No more "now where do I have my USB drive?"

posted Nov 28, 2019, 1:44 PM by Stefan Palan   [ updated Nov 28, 2019, 2:00 PM ]

When giving presentations at conferences or in research seminars, there is always the question of how to get the presentation onto the presenter computer. This involved me having to remember to put the presentation on my USB drive, in the latest version, rembering to bring the USB drive, searching for my USB drive in the seminar room, getting the computer to recognize my USB drive, and finally getting my presentation onto the computer. I have now found a much more convenient option:
  1. Create a folder for your presentations in your Dropbox, Onedrive, or whatever cloud space you favor1
  2. Create a share link to the folder
  3. Use an URL shortener (like,,, ...) to shorten the unwieldy link to something more manageable, like
Once you have prepared the infrastructure this way, simply save the presentation to the local presentation folder (and wait long enough for your cloud space client to upload it). When at the presenter computer, just head to your version of and fetch your presentation from there.

Now just remember to bring your good ol' USB drive in case the presenter computer does not have2 internet ...

1 If you do not have one yet, just choose one of the many free options out there. The limited amount of cloud space you get this way is easily enough for your presentations of the next few centuries. Choose a provider that allows password-protecting sharing links, if you need that.
2 Yes, I relalize computers do not "have" internet, but are connected to the internet. Still, I get the impression the phrase is catching on. Let me know when it has made it into the Oxford Dictionary, so I can delete this footnote.

New paper in Experimental Economics

posted Nov 11, 2019, 5:12 AM by Stefan Palan   [ updated Nov 11, 2019, 5:18 AM ]

Cover of Experimental Economics
The term "wisdom of crowds" is well-recognized at least since the publication of James Surowiecki's book with the same title. It refers to the phenomenon that the aggregated estimates of many different individuals often constitute a surprisingly accurate predictor of the unknown quantity or quality to be estimated. In our latest paper, co-authored with Jürgen Huber and Larissa Senninger from the University of Innsbruck, I study which aggregation mechanism performs best. We compare simple means and medians and more complex, market-based mechanisms. We find that the continuous double auction outperforms all other mechanisms in terms of prediction accuracy.

Palan, S., Huber, J., Senninger, L., Forthcoming. Aggregation mechanisms for crowd predictions, Experimental Economics, DOI: 10.1007/s10683-019-09631-0.

New paper in Journal of Banking and Finance

posted Sep 16, 2019, 3:51 AM by Stefan Palan   [ updated Sep 29, 2019, 11:58 PM ]

Cover, Journal of Banking and Finance
What do investors perceive as risky? And if what they perceive as being risky differs from what finance theory suggests constitues risk - does the market eliminate any potential biases from individual risk perceptions? These are the core questions pursued in a joint paper with Jürgen Huber and Stefan Zeisberger and recently 
published (online first) in the Journal of Banking and Finance. Titled "Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence", the paper finds that investors nearly exclusively focus on an asset's probabilty of yielding negative returns. In other words, risk perception is driven by the probability of losses, while for example the size of the potential losses does not seem to receive investors' attention.

While this result confirms prior research by some of the authors, finance theorists would rely on a market to eliminate any individual biases, yielding efficient prices, which properly reflect more comprehensive risk measures. Yet the paper's most important finding is precisely that this mechanism does not work. The results show that real-money experimental asset market prices fully reflect the individual risk perceptions. Assets with a higher probability of negative returns fetch lower prices in the market and vice versa. This has important implications for markets outside of the lab, for individual investors, and for investment advisors, who should account for this bias.

Huber, J., Palan, S., Zeisberger, S., 2019. Does Investor Risk Perception Drive Asset Prices in Markets? Experimental Evidence, Journal of Banking & Finance 108(105635)., DOI 10.1016/j.jbankfin.2019.105635.

See also:

New paper in Journal of Economic Dynamics and Control

posted Jul 18, 2019, 12:05 AM by Stefan Palan   [ updated Jul 18, 2019, 12:06 AM ]

JEDC cover
A joint paper with Marcus Giamattei, Jürgen Huber, Johann Graf Lambsdorff and Andreas Nicklisch, titled "
Who inflates the bubble? Forecasters and traders in experimental asset markets", has recently been published (online first) in the Journal of Economic Dynamics and Control. It experimentally studies the interaction of traders and analysts and teases apart their respective roles in producing bubble patterns. We find the greatest bubbles in settings where the roles of trader and analyst are clearly separated, with traders trying to maximize their trading profit and analysts being paid for their forecasting accuracy.


posted Apr 3, 2019, 2:07 PM by Stefan Palan   [ updated Aug 3, 2019, 1:00 PM ]

The University of Graz has elected a new senate in which I will serve as a senator from October 2019. I look forward to this new challenge and to working for my alma mater in this new capacity!

Funding for research into post-earnings-announcement drift

posted Mar 21, 2019, 3:51 AM by Stefan Palan   [ updated Mar 21, 2019, 3:55 AM ]

The Austrian Science Fund (FWF) has decided to fund my joint grant application with Erik Theissen, titled "Experiments on the Post-Earnings-Announcement Drift". In this research proposal, we plan to study the causes and mechanisms behind the phenomenon that stock prices tend to drift upward (downward) over extended periods of time following positive (negative) earnings news. Given the funding now granted, my team and I will be able to hire a PhD student to conduct experiments to explore several potential explanations for why post-earnings-announcement drift occurs.

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