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

Author

Listed:
  • Eizo Akiyama

    (Faculty of Engineering, Information and Systems [Tsukuba] - Université de Tsukuba = University of Tsukuba)

  • Nobuyuki Hanaki

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Ryuichiro Ishikawa

    (Faculty of Engineering, Information and Systems [Tsukuba] - Université de Tsukuba = University of Tsukuba)

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.

Suggested Citation

  • Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2014. "How do experienced traders respond to inflows of inexperienced traders? An experimental analysis," Post-Print hal-01463903, HAL.
    • Handle: RePEc:hal:journl:hal-01463903
    DOI: 10.1016/j.jedc.2014.05.007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Asset markets; Experience; Experiment; heterogeneity; Strategic uncertainty;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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