Do investors trade too much? A laboratory experiment
João da Gama Batista,
Damien Challet () and
Cars Hommes ()
Journal of Economic Behavior & Organization, 2017, vol. 140, issue C, 18-34
We run an experiment to investigate the emergence of excess and synchronised trading activity leading to market crashes. Although the environment clearly favours a buy-and-hold strategy, we observe that subjects trade too much, which is detrimental to their wealth given the implemented market impact (known to them). We find that preference for risk leads to higher activity rates and that price expectations are fully consistent with subjects’ actions. In particular, trading subjects try to make profits by playing a buy low, sell high strategy. Finally, we do not detect crashes driven by collective panic, but rather a weak but significant synchronisation of buy activity.
Keywords: Experimental asset markets; Trading volumes; Crashes; Expectations; Risk attitude (search for similar items in EconPapers)
JEL-codes: C91 C92 D84 G11 G12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Do investors trade too much? A laboratory experiment (2017)
Working Paper: Do investors trade too much? A laboratory experiment (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:140:y:2017:i:c:p:18-34
Access Statistics for this article
Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.
More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Haili He ().