Algorithmic Trading in Experimental Markets with Human Traders: A Literature Survey

in HANDBOOK OF EXPERIMENTAL FINANCE (in press)

This chapter surveys the nascent experimental research on the interaction between human and algorithmic (bot) traders in experimental markets. We first discuss studies in which algorithmic traders are in ... [more ▼]

This chapter surveys the nascent experimental research on the interaction between human and algorithmic (bot) traders 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 followed it up by discussing studies in which the researcher allows human traders to decide whether to employ algorithms for trading or to trade by themselves. The paper 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 algorithms on the investor’s psychology is also discussed. [less ▲]

An Experimental Comparison of Two Exchange Economies: Long-Lived Asset Versus Short-Lived Asset

in Management Science (2021)

Underpricing of initial public offerings in experimental asset markets

in Experimental Economics (2020), 23(4)(1002-1029),

Experimental Stock Market Dynamics: Excess bids, directional learning, and adaptive style-investing in a call-auction with multiple multi-period lived assets

in Journal of Economic Behavior and Organization (2019), (157), 209-224

A Test of the Modigliani-Miller Invariance Theorem and Arbitrage in Experimental Asset Markets

in Journal of Finance (2019), 74(1)

Experimental Stock Market Dynamics: Excess bids, directional learning, and adaptive style investing in a call-auction with multiple multiperiod lived assets

E-print/Working paper (2018)

A test of the Modigliani Miller Invariance Theorem and Arbitrage in Experimental Asset Markets

E-print/Working paper (2018)

Modigliani and Miller (1958) show that a repackaging of asset return streams to equity and debt has no impact on the total market value of the firm if pricing is arbitrage-free. We test the empirical ... [more ▼]

Modigliani and Miller (1958) show that a repackaging of asset return streams to equity and debt has no impact on the total market value of the firm if pricing is arbitrage-free. We test the empirical validity of this invariance theorem in experimental asset markets with simultaneous trading in two shares of perfectly-correlated returns. Our data support value invariance for assets of identical risks when returns are perfectly correlated. However, exploiting price discrepancies has risk when returns have the same expected value but are uncorrelated, and we find that the law of one price is violated in this case. Discrepancies shrink in consecutive markets, but seem to persist even with experienced traders. In markets where overall trader acuity is high, assets trade closer to parity. [less ▲]

Impulse response dynamics in weakest link games

in German Economic Review (2016), 17(3),

GfeW

Diverse speeches and writings (2015)

Jahrestagung des Sozialwissenschftlichen Ausschusses

Presentation (2015)