Advanced Search
MyIDEAS: Login to save this paper or follow this series

Psychological Traits and Trading Strategies

Contents:

Author Info

  • Bruno Biais

    ()
    (IDEI at Toulouse University)

  • Denis Hilton

    (Social Psychology Department at Toulouse University)

  • Karine Mazurier

    (Social Psychology Department at Toulouse University)

  • Sébastien Pouget

    ()
    (Université des Sciences Sociales de Toulouse and CSEF, University of Salerno)

Abstract

This paper analyzes experimentally if psychological traits and cognitive biases affect trading behaviour and performance. Based on the answers of 67 subjects to a psychological questionnaire we measured their degree of overconfidence, impulsiveness and self-monitoring, and their availability, representativeness and confirmation biases. The 67 subjects also participated in an experimental financial market, in the spirit of Plott and Sunder (1988). We find that impulsive subjects tend to place more orders but do not incur larger losses. We also find that overconfident subjects and subjects prone to the confirmation and representativeness biases have a greater tendency to place unprofitable orders. This negative impact of cognitive biases on trading performance is sronger when subjects have acquired some experience of the game. This suggests that biased subjects engage in improper learning.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.csef.it/WP/wp39.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 39.

as in new window
Length:
Date of creation: 01 Apr 2000
Date of revision:
Handle: RePEc:sef:csefwp:39

Contact details of provider:
Postal: I-80126 Napoli
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Email:
Web page: http://www.csef.it/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, 04.
  2. Joel L. Schrag, 1999. "First Impressions Matter: A Model Of Confirmatory Bias," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 37-82, February.
  3. Anderson, M.J. & Sunder, S., 1995. "Professional Traders as Intuitive Bayesians," GSIA Working Papers 1995-05, Carnegie Mellon University, Tepper School of Business.
  4. Camerer, Colin, . "Progress and Behavioral Game Theory," Working Papers 1004, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-54, October.
  6. Klayman, Joshua & Soll, Jack B. & Gonzalez-Vallejo, Claudia & Barlas, Sema, 1999. "Overconfidence: It Depends on How, What, and Whom You Ask, , , , , , , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 79(3), pages 216-247, September.
  7. Selten,Reinhard & Mitzkewitz,Michael & Uhlich,Gerald, . "Duopoly strategies programmed by experienced players," Discussion Paper Serie B 106, University of Bonn, Germany.
  8. Biais, Bruno & Pouget, Sébastien, 2000. "Microstructure, Incentives, and the Discovery of Equilibrium in Experimental Financial Markets," IDEI Working Papers 103, Institut d'Économie Industrielle (IDEI), Toulouse.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Dennis Dittrich & Werner Guth & Boris Maciejovsky, 2005. "Overconfidence in investment decisions: An experimental approach," The European Journal of Finance, Taylor & Francis Journals, vol. 11(6), pages 471-491.
  2. Shahzad, Syed jawad hussain & Ali, Paeman & Saleem, Fawad & Ali, Sajid & Akram, Sehrish, 2013. "Stock market efficiency: Behavioral or traditional paradigm?Evidence from Karachi Stock Exchange (KSE) and investors community of Pakistan," MPRA Paper 45095, University Library of Munich, Germany.
  3. Glaser, Markus & Weber, Martin, 2003. "Overconfidence and Trading Volume," Sonderforschungsbereich 504 Publications 03-07, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  4. Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
  5. Glaser, Markus & Weber, Martin, 2003. "Overconfidence and Trading Volume," CEPR Discussion Papers 3941, C.E.P.R. Discussion Papers.
  6. Patterson, Fernando M. & Daigler, Robert T., 2014. "The abnormal psychology of investment performance," Review of Financial Economics, Elsevier, vol. 23(2), pages 55-63.
  7. Miraldo, M & Galizzi, M & Stavropoulou, C, 2013. "In sickness but not in wealth: Field evidence on patients? risk preferences in the financial and health domain," Working Papers 12579, Imperial College, London, Imperial College Business School.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:39. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.