How Do Experienced Traders Respond to Inflows of Inexperienced Traders? An Experimental Analysis

38 Pages Posted: 19 Dec 2013

See all articles by Eizo Akiyama

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management

Nobuyuki Hanaki

Osaka University - Institute of Social and Economic Research

Ryuichiro Ishikawa

Waseda University-SILS

Date Written: December 18, 2013

Abstract

We conducted asset market experiments where one experienced subject (EH) interacts with five inexperienced subjects (1EH5H) to investigate how EHs change their price forecasts and trading strategies when faced with strategic uncertainty caused by inflows of inexperienced subjects. Only half the EHs initially forecasted prices deviating more from the fundamental values in 1EH5H than in the final round of the experiment in which they had previously participated. Furthermore, the majority of our EHs did not change their trading behaviour. Many EHs act as price stabilisers when the inflow of inexperienced subjects is not associated with other changes in market conditions.

Keywords: Strategic uncertainty, Experience, Heterogeneity, Experiment, Asset markets

JEL Classification: C90, D84

Suggested Citation

Akiyama, Eizo and Hanaki, Nobuyuki and Ishikawa, Ryuichiro, How Do Experienced Traders Respond to Inflows of Inexperienced Traders? An Experimental Analysis (December 18, 2013). Available at SSRN: https://ssrn.com/abstract=2369186 or http://dx.doi.org/10.2139/ssrn.2369186

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management ( email )

Japan

Nobuyuki Hanaki (Contact Author)

Osaka University - Institute of Social and Economic Research ( email )

6-1, Mihogaoka
Suita, Osaka 567-0047
Japan

Ryuichiro Ishikawa

Waseda University-SILS ( email )

Shinjuku, Tokyo 1658050
Japan

HOME PAGE: http://www.f.waseda.jp/r.ishikawa/

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