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Bubbles in hybrid markets - How expectations about algorithmic trading affect human trading

Mike Farjam and Oliver Kirchkamp

No 2015-003, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Bubbles are omnipresent in lab experiments with asset markets. But these experiments were (mostly) conducted in environments with only human traders. Today markets are substantially determined by algorithmic traders. Here we use a laboratory experiment to measure human trading behaviour changes if these humans expect algorithmic traders. To disentangle the direct effect algorithmic traders have we use a clean design where we can manipulate only the expectations of human traders. We find clearly smaller bubbles if human traders expect algorithmic traders to be present.

Keywords: Bubbles; Expectations; Experiment; Algorithmic Traders (search for similar items in EconPapers)
JEL-codes: C92 G02 (search for similar items in EconPapers)
Date: 2015-02-11
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Bubbles in hybrid markets: How expectations about algorithmic trading affect human trading (2018) Downloads
Working Paper: Bubbles in Hybrid Markets - How Expectations about Algorithmic Trading Affect Human Trading (2015) Downloads
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