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