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Trading fast and slow: The role of deliberation in experimental financial markets

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  • Ferri, Giovanni
  • Ploner, Matteo
  • Rizzolli, Matteo

Abstract

Financial bubbles cause misallocation of resources and even systemic crises. Experimental finance has long studied both the determinants of bubbles and institutional measures to prevent them. Within the framework of the dual-process theory, we experimentally investigate whether traders under higher time pressure (Fast condition) behave differently than traders under lower time pressure (Slow condition). Relative to the Fast condition, the Slow condition dampens market price volatility, dramatically reduces the spread between ask and bid limit orders, and leads to higher equality in payoffs.

Suggested Citation

  • Ferri, Giovanni & Ploner, Matteo & Rizzolli, Matteo, 2021. "Trading fast and slow: The role of deliberation in experimental financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:beexfi:v:32:y:2021:i:c:s2214635021001374
    DOI: 10.1016/j.jbef.2021.100593
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    More about this item

    Keywords

    Rational vs. emotional choice; Dual-process theory; Financial bubbles; Experimental and behavioral finance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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