Algorithmic trading in experimental markets with human traders: A literature survey

Te Bao, Elizaveta Nekrasova, Tibor Neugebauer and Yohanes Riyanto

Chapter 23 in Handbook of Experimental Finance, 2022, pp 302-322 from Edward Elgar Publishing

Abstract: This chapter surveys the nascent experimental research on the interaction between human and algorithmic trading in experimental markets. We first discuss studies in which algorithmic traders are in the researcher's hands. Specifically, the researcher assigns computer agents as traders in the market. We then discuss studies in which the researcher leaves in human subjects' hands the decision to employ algorithms for trading. The chapter introduces the types and performances of algorithmic traders that interact with human subjects in the laboratory, including zero-intelligent traders, arbitragers, fundamentalists, adaptive algorithms, and manipulators. We find that whether algorithm traders earn more profit than human traders crucially depends on the asset's fundamental value process and the market environment. The potential impact of interactions with algorithmic traders on the investor's psychology is also discussed.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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