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Ethnic diversity deflates price bubbles

Overview of attention for article published in Proceedings of the National Academy of Sciences of the United States of America, November 2014
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About this Attention Score

  • In the top 5% of all research outputs scored by Altmetric
  • High Attention Score compared to outputs of the same age (99th percentile)
  • High Attention Score compared to outputs of the same age and source (98th percentile)

Mentioned by

news
31 news outlets
blogs
9 blogs
twitter
149 tweeters
facebook
6 Facebook pages
googleplus
1 Google+ user
reddit
2 Redditors

Citations

dimensions_citation
101 Dimensions

Readers on

mendeley
239 Mendeley
citeulike
1 CiteULike
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Title
Ethnic diversity deflates price bubbles
Published in
Proceedings of the National Academy of Sciences of the United States of America, November 2014
DOI 10.1073/pnas.1407301111
Pubmed ID
Authors

Sheen S. Levine, Evan P. Apfelbaum, Mark Bernard, Valerie L. Bartelt, Edward J. Zajac, David Stark

Abstract

Markets are central to modern society, so their failures can be devastating. Here, we examine a prominent failure: price bubbles. Bubbles emerge when traders err collectively in pricing, causing misfit between market prices and the true values of assets. The causes of such collective errors remain elusive. We propose that bubbles are affected by ethnic homogeneity in the market and can be thwarted by diversity. In homogenous markets, traders place undue confidence in the decisions of others. Less likely to scrutinize others' decisions, traders are more likely to accept prices that deviate from true values. To test this, we constructed experimental markets in Southeast Asia and North America, where participants traded stocks to earn money. We randomly assigned participants to ethnically homogeneous or diverse markets. We find a marked difference: Across markets and locations, market prices fit true values 58% better in diverse markets. The effect is similar across sites, despite sizeable differences in culture and ethnic composition. Specifically, in homogenous markets, overpricing is higher as traders are more likely to accept speculative prices. Their pricing errors are more correlated than in diverse markets. In addition, when bubbles burst, homogenous markets crash more severely. The findings suggest that price bubbles arise not only from individual errors or financial conditions, but also from the social context of decision making. The evidence may inform public discussion on ethnic diversity: it may be beneficial not only for providing variety in perspectives and skills, but also because diversity facilitates friction that enhances deliberation and upends conformity.

Twitter Demographics

The data shown below were collected from the profiles of 149 tweeters who shared this research output. Click here to find out more about how the information was compiled.

Mendeley readers

The data shown below were compiled from readership statistics for 239 Mendeley readers of this research output. Click here to see the associated Mendeley record.

Geographical breakdown

Country Count As %
United States 7 3%
United Kingdom 3 1%
Italy 2 <1%
Hungary 1 <1%
Singapore 1 <1%
Spain 1 <1%
Sweden 1 <1%
Luxembourg 1 <1%
Unknown 222 93%

Demographic breakdown

Readers by professional status Count As %
Student > Ph. D. Student 78 33%
Researcher 32 13%
Student > Master 31 13%
Professor 18 8%
Student > Doctoral Student 14 6%
Other 44 18%
Unknown 22 9%
Readers by discipline Count As %
Social Sciences 46 19%
Business, Management and Accounting 35 15%
Psychology 34 14%
Economics, Econometrics and Finance 28 12%
Agricultural and Biological Sciences 15 6%
Other 54 23%
Unknown 27 11%

Attention Score in Context

This research output has an Altmetric Attention Score of 424. This is our high-level measure of the quality and quantity of online attention that it has received. This Attention Score, as well as the ranking and number of research outputs shown below, was calculated when the research output was last mentioned on 10 October 2021.
All research outputs
#41,499
of 19,178,874 outputs
Outputs from Proceedings of the National Academy of Sciences of the United States of America
#1,135
of 92,436 outputs
Outputs of similar age
#467
of 325,165 outputs
Outputs of similar age from Proceedings of the National Academy of Sciences of the United States of America
#19
of 955 outputs
Altmetric has tracked 19,178,874 research outputs across all sources so far. Compared to these this one has done particularly well and is in the 99th percentile: it's in the top 5% of all research outputs ever tracked by Altmetric.
So far Altmetric has tracked 92,436 research outputs from this source. They typically receive a lot more attention than average, with a mean Attention Score of 32.9. This one has done particularly well, scoring higher than 98% of its peers.
Older research outputs will score higher simply because they've had more time to accumulate mentions. To account for age we can compare this Altmetric Attention Score to the 325,165 tracked outputs that were published within six weeks on either side of this one in any source. This one has done particularly well, scoring higher than 99% of its contemporaries.
We're also able to compare this research output to 955 others from the same source and published within six weeks on either side of this one. This one has done particularly well, scoring higher than 98% of its contemporaries.