The study and findings

The research team recruited 261 undergraduate business students to participate in a stock market exercise. Before the experiment began, each participant had their GMA measured through an online test known as the Wonderlic Personnel Test Quicktest (WPT-Q). Following this, each participant was assigned to one of the three goal-type treatment conditions: performance goals, learning goals, and do-your-best goals.

Each participant was asked to estimate the pricing for multiple stocks given potential indicators of firm value (e.g. advertising, revenue growth). Initially, participants were unaware of how the indicators were related to the correct price. However, after each trial, they were provided with the correct stock price. This gave the participants the chance to determine how reliable the indicators were.

Their performance was measured by the distance between the individual’s estimate of the stock price and the correct price. In the performance goal group, participants were told they must estimate a stock price within $7 of the correct price in order to be successful. Participants in the learning goal group were instructed to identify and implement seven effective strategies to maximize their performance. Lastly, participants in the do-your-best group were instructed to simply do their best.

The experimenters also added three subtle manipulations to mimic the dynamics of the constantly-changing business environment. Each person was exposed to the same three treatment changes.

The first change, known as dynamic complexity, involved changing the relationship between indicators of firm value and the correct stock price. Originally, market share was a significant indicator of the correct stock price. After the change was implemented, market share could no longer be used as a reliable predictor. Another indicator, revenue growth, experienced the opposite effect.

For their second change, known as component complexity, the researchers increased the number of indicators that affected the correct stock price.

Finally, coordinator complexity was implemented, making each indicator equally valid. This final change increased complexity because no single indicator could be relied on more than the other indicators when determining the correct price. The participants ability to adapt to each change was measured and factored into their results. Over the span of 90 minutes, each participant was presented with 270 decision trials.