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Herding, Contrarianism and Delay in Financial Market Trading

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  • Park, A.
  • Sgroi, D.

Abstract

Herding and contrarian behavior are often-cited features of real-world financial markets. Theoretical models of continuous trading that study herding and contrarianism, however, usually do not allow traders to choose when to trade or to trade more than once. We present a large-scale experiment to explore these features within a tightly controlled laboratory environment. Herding and contrarianism are significantly more pronounced than in compa- rable studies that do not allow traders to time their decisions. Traders with extreme information tend to trade earliest, followed by those with information conducive to contrarianism, while those with the theoretical potential to herd delay the most.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0941.

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Date of creation: 12 Oct 2009
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Handle: RePEc:cam:camdae:0941

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: Herding; Contrarianism; Endogenous-time Trading; Experiments;

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References

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Citations

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Cited by:
  1. Jason Shachat & Anand Srinivasan, 2011. "Informational Price Cascades and Non-aggregation of Asymmetric Information in Experimental Asset Markets," Working Papers 1102, Xiamen Unversity, The Wang Yanan Institute for Studies in Economics, Finance and Economics Experimental Laboratory, revised 14 Apr 2011.
  2. Christopher Boortz & Simon Jurkatis & Stephanie Kremer & Dieter Nautz, 2013. "Institutional Herding in Financial Markets: New Evidence through the Lens of a Simulated Model," Discussion Papers of DIW Berlin 1336, DIW Berlin, German Institute for Economic Research.
  3. Ivanov, Asen & Levin, Dan & Peck, James, 2013. "Behavioral biases in endogenous-timing herding games: An experimental study," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 87(C), pages 25-34.
  4. Christopher Boortz & Stephanie Kremer & Simon Jurkatis & Dieter Nautz, 2014. "Information Risk, Market Stress and Institutional Herding in Financial Markets: New Evidence Through the Lens of a Simulated Model," SFB 649 Discussion Papers SFB649DP2014-029, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Jason Shachat & Anand Srinivasan, 2013. "Informational Price Cascades and Non-aggregation of Asymmetric Information in Experimental Asset Markets," Papers 2013-10-14, Working Paper.
  6. Christopher Boortz & Simon Jurkatis & Stephanie Kremer & Dieter Nautz, 2013. "Herding in financial markets: Bridging the gap between theory and evidence," SFB 649 Discussion Papers SFB649DP2013-036, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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