Anchoring and Manipulation in Speculative Markets : A Field Experiment

A common finding in laboratory studies is that subjects anchor on irrelevant initial cues when valuing assets. We run a field experiment to examine whether this heuristic can be exploited to manipulate prices in real markets. We provide early quotes in a series of horse race betting markets, and randomly vary whether these quotes are high or low. We find that subsequent prices are indeed distorted in the direction of our anchor, and that the effect spills over into correlated markets. Furthermore, we show that there are positive returns to some market manipulation strategies predicated on exploiting the anchoring heuristic