Psychological Traits and Trading Strategies

31 Pages Posted: 26 Feb 2002

See all articles by Bruno Biais

Bruno Biais

Centre for Economic Policy Research (CEPR)

Denis Hilton

University of Toulouse

Karine Mazurier

Universite de Toulouse

Sebastien Pouget

Toulouse School of Economics

Date Written: February 2002

Abstract

In this Paper we measure psychological traits and show that they significantly affect behaviour and performance in a financial context. Based on the answers of 184 subjects to a psychological questionnaire we measured their degree of overconfidence, ie. the extent to which they overestimate the precision of their information, and self-monitoring, which is a form of social intelligence. The subjects also participated in an experimental financial market under asymmetric information in the spirit of Plott and Sunder (1988). In line with the hypothesis that they suffer from the winner's curse, overconfident subjects are found to earn relatively low trading profits. In contrast, our finding that high self-monitors earn relatively large trading profits is consistent with the hypothesis that they are relatively good at anticipating the trading motivations of the other traders.

Keywords: Social intelligence, self-monitors, trading strategies

Suggested Citation

Biais, Bruno and Hilton, Denis and Mazurier, Karine and Pouget, Sebastien, Psychological Traits and Trading Strategies (February 2002). CEPR Discussion Paper No. 3195. Available at SSRN: https://ssrn.com/abstract=302026

Bruno Biais (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Denis Hilton

University of Toulouse ( email )

41 Allées Jules Guesde - CS 61321
TOULOUSE
France

Karine Mazurier

Universite de Toulouse

Place Anatole France
Toulouse Cedex, F-31042
France

Sebastien Pouget

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
France

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