How do experienced traders respond to inflows of inexperienced traders? An experimental analysis

Eizo Akiyama; Nobuyuki Hanaki; Ryuichiro Ishikawa

doi:10.1016/j.jedc.2014.05.007

How do experienced traders respond to inflows of inexperienced traders? An experimental analysis

Eizo Akiyama, Nobuyuki Hanaki^*, Ryuichiro Ishikawa

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

20 Citations (Scopus)

Abstract

We conducted asset market experiments where one experienced subject interacts with five inexperienced subjects to investigate how experienced subjects change their price forecasts and trading behavior when faced with strategic uncertainty caused by inflows of inexperienced subjects. Only half the experienced subjects initially forecasted prices deviating more from the fundamental values in the market with five inexperienced subjects than in the final round of the experiment in which they had previously participated. Furthermore, the majority of our experienced subjects did not change their trading behavior. Many experienced subjects act as price stabilizers when the inflow of inexperienced subjects is not associated with other changes in market conditions.

Original language	English
Pages (from-to)	1-18
Number of pages	18
Journal	Journal of Economic Dynamics and Control
Volume	45
DOIs	https://doi.org/10.1016/j.jedc.2014.05.007
Publication status	Published - 2014 Aug
Externally published	Yes

Keywords

Asset markets
Experience
Experiment
Heterogeneity
Strategic uncertainty

ASJC Scopus subject areas

Economics and Econometrics
Control and Optimization
Applied Mathematics

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10.1016/j.jedc.2014.05.007

Cite this

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title = "How do experienced traders respond to inflows of inexperienced traders? An experimental analysis",

abstract = "We conducted asset market experiments where one experienced subject interacts with five inexperienced subjects to investigate how experienced subjects change their price forecasts and trading behavior when faced with strategic uncertainty caused by inflows of inexperienced subjects. Only half the experienced subjects initially forecasted prices deviating more from the fundamental values in the market with five inexperienced subjects than in the final round of the experiment in which they had previously participated. Furthermore, the majority of our experienced subjects did not change their trading behavior. Many experienced subjects act as price stabilizers when the inflow of inexperienced subjects is not associated with other changes in market conditions.",

keywords = "Asset markets, Experience, Experiment, Heterogeneity, Strategic uncertainty",

author = "Eizo Akiyama and Nobuyuki Hanaki and Ryuichiro Ishikawa",

note = "Funding Information: Hirofumi Kamiatsuku, Michiko Ogaku, Makoto Soga, and Hiroto Yonenoh provided invaluable assistance in organizing the experiments. This project is partly financed by a JSPS-CNRS bilateral research Grant , a JSPS-ANR bilateral research Grant ( ANR-11-FRJA-0002 ) “BECOA,” and financial aid from the Japanese Center for Economic Research and Japanese Securities Scholarship Foundation . ",

year = "2014",

month = aug,

doi = "10.1016/j.jedc.2014.05.007",

language = "English",

volume = "45",

pages = "1--18",

journal = "Journal of Economic Dynamics and Control",

issn = "0165-1889",

publisher = "Elsevier",

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T1 - How do experienced traders respond to inflows of inexperienced traders? An experimental analysis

AU - Akiyama, Eizo

AU - Hanaki, Nobuyuki

AU - Ishikawa, Ryuichiro

N1 - Funding Information: Hirofumi Kamiatsuku, Michiko Ogaku, Makoto Soga, and Hiroto Yonenoh provided invaluable assistance in organizing the experiments. This project is partly financed by a JSPS-CNRS bilateral research Grant , a JSPS-ANR bilateral research Grant ( ANR-11-FRJA-0002 ) “BECOA,” and financial aid from the Japanese Center for Economic Research and Japanese Securities Scholarship Foundation .

PY - 2014/8

Y1 - 2014/8

N2 - We conducted asset market experiments where one experienced subject interacts with five inexperienced subjects to investigate how experienced subjects change their price forecasts and trading behavior when faced with strategic uncertainty caused by inflows of inexperienced subjects. Only half the experienced subjects initially forecasted prices deviating more from the fundamental values in the market with five inexperienced subjects than in the final round of the experiment in which they had previously participated. Furthermore, the majority of our experienced subjects did not change their trading behavior. Many experienced subjects act as price stabilizers when the inflow of inexperienced subjects is not associated with other changes in market conditions.

AB - We conducted asset market experiments where one experienced subject interacts with five inexperienced subjects to investigate how experienced subjects change their price forecasts and trading behavior when faced with strategic uncertainty caused by inflows of inexperienced subjects. Only half the experienced subjects initially forecasted prices deviating more from the fundamental values in the market with five inexperienced subjects than in the final round of the experiment in which they had previously participated. Furthermore, the majority of our experienced subjects did not change their trading behavior. Many experienced subjects act as price stabilizers when the inflow of inexperienced subjects is not associated with other changes in market conditions.

KW - Asset markets

KW - Experience

KW - Experiment

KW - Heterogeneity

KW - Strategic uncertainty

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VL - 45

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JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

ER -

How do experienced traders respond to inflows of inexperienced traders? An experimental analysis

Abstract

Keywords

ASJC Scopus subject areas

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