Trading complex assets
By: Bruce I. Carlin, Shimon Kogan
Contributors: Kogan, Shimon; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16187; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16187.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We perform an experimental study of complexity to assess its effect on trading behavior, price volatility, liquidity, and trade efficiency.  Subjects were asked to deduce the value of a particular asset from information they were given about the composition and price of several portfolios.  Following that, subjects traded with each other anonymously in a well-defined, simple bargaining process.  Portfolio problems ranged from requiring simple analysis to more complicated computation.  Complexity altered subjects' bidding strategies, decreased liquidity, increased price volatility, and decreased trade efficiency.  Female subjects were affected more by complexity (e.g., lower trade frequency), although they achieved higher payoffs in the complex treatment.  Our analysis suggests that complexity may be a driver of volatility and liquidity in financial markets and provides novel testable empirical predictions"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 8/19/2010.

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