Article (Scientific journals)
Arbitrage bots in experimental asset markets
Neugebauer, Tibor
2023In Journal of Economic Behavior and Organization, 206, p. 262-278
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Keywords :
asset market experiment; arbitrage; algorithmic trading
Abstract :
[en] Trading algorithms are an integral component of modern asset markets. In twin experimental markets for long-lived correlated assets we examine the impact of alternative types of arbitrage-seeking algorithms. These arbitrage robot traders vary in their latency and whether they make or take market liquidity. All arbitrage robot traders we examine generate greater conformity to the law-of-one-price across the twin markets. However, only the liquidity providing arbitrage robot trader moves prices into closer alignment with fundamental values. The reduced mispricing comes with varying social costs; arbitrage robot traders’ gains reduce the earnings of human traders. We identify factors which drive differences in human trader performance and find that the presence of an arbitrage robot trader has no disproportionate effect with respect to these factors on subjects’ earnings.
Disciplines :
Author, co-author :
Neugebauer, Tibor ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF)
External co-authors :
Language :
Title :
Arbitrage bots in experimental asset markets
Publication date :
February 2023
Journal title :
Journal of Economic Behavior and Organization
Publisher :
Elsevier, Netherlands
Volume :
Pages :
Peer reviewed :
Peer Reviewed verified by ORBi
Focus Area :
FnR Project :
FNR11585355 - Bilateral Esrc/Fnr: Experimental Assessment Of The Societal Impact Of Algorithmic Traders In Asset Markets, 2016 (01/01/2018-31/12/2021) - Tibor Neugebauer
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since 28 January 2023


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