A theoretical framework for trading experiments

Maxence Soumare, Jørgen Vitting Andersen (jorgen-vitting.andersen@univ-paris1.fr), Francis Bouchard, Alain Elkaim, Dominique Guegan (dominique.guegan@univ-paris1.fr), Justin Leroux, Michel Miniconi and Lars Stentoft
Additional contact information
Maxence Soumare: Laboratoire J.-A. Dieudonné - Université de Nice-Sophia Antipolis
Jørgen Vitting Andersen: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.cnrs.fr
Francis Bouchard: HEC Montréal
Alain Elkaim: HEC Montréal
Dominique Guegan: Centre d'Economie de la Sorbonne - Paris School of Economics, https://cv.archives-ouvertes.fr/dominique-guegan
Michel Miniconi: Laboratoire J.-A. Dieudonné - Université de Nice-Sophia Antipolis

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: A general framework is suggested to describe human decision making in a certain class of experiments performed in a trading laboratory. We are in particular interested in discerning between two different moods, or states of the investors, corresponding to investors using fundemental investment strategies, technical analysis investment strategies respectively. Our framework accounts for two opposite situations already encountered in experimental setups: i) the rational expectations case, and ii) the case of pure speculation. We consider new experimental conditions which allow both elements to be present in the decision making process of the traders, thereby creating a dilemma in terms of investment strategy. Our theoretical framework allows us to predict the outcome of this type of trading experiments, depending on such variables as the number of people trading, the liquidity of the market, the amount of information used in technical analysis strategies, as well as the dividends attributed to an asset. We find that it is possible to give a qualitative prediction of trading behavior depending on a ratio that quantifies the fluctuations in the model

Keywords: Decision making; game theory; complex systems theory; technical analysis; rational expectations (search for similar items in EconPapers)
JEL-codes: C0 D81 D84 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2012-11
New Economics Papers: this item is included in nep-cbe and nep-exp
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http://mse.univ-paris1.fr/pub/mse/CES2012/12083.pdf (application/pdf)

Related works:
Working Paper: A theoretical framework for trading experiments (2013)
Working Paper: A theoretical framework for trading experiments (2012)
Working Paper: A theoretical framework for trading experiments (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:12083

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