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Financial misbehavior is widespread and costly. The Dutch government legally requires every employee in the financial sector to take a Hippocratic oath, the so-called "banker's oath." We investigate whether moral nudges that directly and indirectly remind financial advisers of their oath affect their service. In a large-scale audit study, professional auditors confronted 201 Dutch financial advisers with a conflict of interest. We find that when auditors apply a moral nudge, referring to the banker's oath, advisers are less likely to prioritize bank's interests. In additional prediction tasks, we find that Dutch regulators expect stronger effects of the oath than observed.

Financial misbehavior is widespread and costly. The Dutch government legally requires every employee in the financial sector to take a Hippocratic oath, the so-called ``banker's oath.'' We investigate whether moral nudges that directly and indirectly remind financial advisers of their oath affect their service. In a large-scale audit study, professional auditors confronted 201 Dutch financial advisers with a conflict of interest. We find that when auditors apply a moral nudge, referring to the banker's oath, advisers are less likely to prioritize bank's interests. In additional prediction tasks, we find that Dutch regulators expect stronger effects of the oath than observed.

Contributions by investor-owned companies play major roles in financing the campaigns of candidates for elective office in the United States. We look at the presidential level and analyze contributions by companies before an election and their stock market performance following US presidential elections from 1992 to 2004. We find that companies experienced abnormal positive post-election returns with (i) a higher percentage of contributions given to the eventual winner and (ii) with a higher total contribution given. Hypothetical portfolios of the 30 largest corporate contributors formed according to (i) the percentage of contributions given to the winner in a presidential election and (ii) the total contribution (divided by market capitalization) would have earned significant abnormal returns in the two years after an election. While all results hold for Bill Clinton and George W. Bush, they are stronger by a magnitude of two to three under W. Bush. Adapted from the source document.

To explore why bubbles frequently emerge in the experimental asset market model of Smith, Suchanek, and Williams (1988), we vary the fundamental value process (constant or declining) and the cash– to–asset value ratio (constant or increasing). We observe high mispricing in treatments with a declining fundamental value, while overvaluation emerges when coupled with an increasing C/A ratio. A questionnaire reveals that the declining fundamental value process confuses subjects, as they expect the fundamental value to stay constant. Running the experiment with a different context ("stocks of a depletable gold mine" instead of "stocks") significantly reduces mispricing and overvaluation as it reduces confusion. (JEL C91, D14, G11, G12)

As the introduction of financial transaction taxes is increasingly discussed by political leaders we explore possible consequences such taxes could have on markets. Here we examine how "stylized facts", namely fat tails and volatility clustering, are affected by different tax regimes in laboratory experiments. We find that leptokurtosis of price returns is highest and clustered volatility is weakest in unilaterally taxed markets (where tax havens exist). Instead, tails are slimmest and volatility clustering is strongest in tax havens. When an encompassing financial transaction tax is levied, stylized facts hardly change compared to a scenario with no tax on all markets.