Trading by Professional Traders: An Experiment

Marco Angrisani, Marco Cipriani, Roberta De Filippis, Antonio Guarino and Ryan Kendall

No 20456, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the behavior of professional traders in an experiment in which, endowed with private information, they trade an asset over multiple periods. Professional traders do not produce the price bubbles observed with student subjects and aggregate private information better; bubbles also do not arise in mixed markets with traders and students trading together. Professional traders exhibit higher strategic sophistication than students as measured by their Guessing Game choices. We link strategic sophistication to trading in the financial market, and show that traders with higher levels of strategic sophistication earn higher capital gains and trading profits.

Keywords: Experiment; Bubbles; professional traders; strategic sophistication; Information aggregation; Informational efficiency (search for similar items in EconPapers)
JEL-codes: C93 G11 G14 (search for similar items in EconPapers)
Date: 2025-07
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