Humans, Robots and Market Crashes: A Laboratory Study ∗

Todd Feldman and Daniel Friedman

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: We introduce human traders into an agent based financial market simulation prone to bubbles and crashes. We find that human traders earn lower profits overall than do the simulated agents (“robots”) but earn higher profits in the most crash-intensive periods. Inexperienced human traders tend to destabilize the smaller (10 trader) mar- kets, but otherwise they have little impact on bubbles and crashes in larger (30 trader) markets and when they are more experienced. Humans’ buying and selling choices respond to the payoff gradient in a manner similar to the robot algorithm. Likewise, following losses, humans’ choices shift towards faster selling. There are problems in properly identifying fundamentalist and trend-following strategies in our data.

Keywords: Financial markets; agent-based models; experimental economics (search for similar items in EconPapers)
Date: 2008-10-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/4kf382p6.pdf;origin=repeccitec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt4kf382p6

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().