Overconfidence, risk aversion and (economic) behavior of individual traders in experimental asset markets
Julija Michailova (julija_michailova@yahoo.com)
MPRA Paper from University Library of Munich, Germany
Abstract:
In this paper influence of behavioral factors (overconfidence and risk aversion) on financial decision making of economic subjects is analyzed. For this purpose two kinds of experiments were conducted: asset market and risk aversion experiments. In conducted asset market sessions subjects, based on their pre-experimental overconfidence scores, were assigned to two types of markets: the least overconfident ones formed five “rational” markets and the most overconfident ones formed five “overconfident” markets. Data collected from ten experimental sessions revealed that individual performance and trade activity were overconfidence dependent. Even small variations in miscalibration among players of the same “type”, comprising each of the asset markets, were sufficient to cause this effect. In the second part of experiment, post hoc assessment of risk aversion was implemented in a sample of former participants of the asset market experiment (32 persons). The presented evidence suggests that risk aversion was not among the factors that had influence on individual engagement in trade activity or performance. It was concluded that in the sample, for which risk aversion measurements were obtained, experimental market outcomes were overconfidence and not risk aversion driven.
Keywords: overconfidence; individual behavior; experiment. (search for similar items in EconPapers)
JEL-codes: C90 C91 D81 G11 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-neu and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (7)
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https://mpra.ub.uni-muenchen.de/26390/1/MPRA_paper_26390.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/30561/1/MPRA_paper_30561.pdf revised version (application/pdf)
Related works:
Working Paper: Overconfidence, Risk Aversion and Individual Financial Decisions in Experimental Asset Markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26390
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