IDEAS home Printed from
   My bibliography  Save this paper

The Effect of Financial Selection in Experimental Asset Markets



The market selection hypothesis posits that over time more successful traders will stay in the market, whereas those with trading losses will exit. If success is at least somewhat determined by behavior, then as a result of market selection traders who survive in markets behave differently than traders who are randomly drawn from the population to participate in markets. This effect has so far been ignored in the literature, therefore we design and carry out an experiment to study the effects of market selection on market outcomes. We find that markets populated by more extreme earners exhibit stronger mispricing, and that this is strongly related to the fact that more extreme earners experience higher bubbles in the past. This suggests that experience may not decrease bubbles in real markets as much as was previously thought. Furthermore, we find evidence of relationships between earnings, trading activity, portfolio risk and transaction risk. Mistakes are also associated with more extreme earnings, however this disappears over time.

Suggested Citation

  • Dmitry Gladyrev & Owen Powell & Natalia Shestakova, 2014. "The Effect of Financial Selection in Experimental Asset Markets," Vienna Economics Papers 1404, University of Vienna, Department of Economics.
  • Handle: RePEc:vie:viennp:1404

    Download full text from publisher

    File URL:
    Download Restriction: no


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

    Cited by:

    1. Praveen Kujal & Owen Powell, 2017. "Bubbles in Experimental Asset Markets," Working Papers 17-01, Chapman University, Economic Science Institute.

    More about this item

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vie:viennp:1404. 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: (Paper Administrator). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.