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The Effects of Social Interaction and Psychological Bias on Trading Behavior: Evidence from a Laboratory Experiment

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Document pages: 19 pages

Abstract: This paper details an experiment designed to explore the trading behaviors of investors that result from psychological biases and social interactions. In total, 88 investors were tracked for 6 months and 40,795 transactions were recorded. The research conducted an experimental survey and estimated a system analysis model to generate several important conclusions. First, the degree of regret bias and the disposition effects are unrelated, probably because the professional training of investors and the disposition effects are not significantly related. Second, if investors are affected by contradictions arising from their decisions, then the likelihood that they will sell a stock will decrease as the investor relationships in the community improve and the regret bias increases. Third, male investors prefer to trade derivatives, and even after controlling for the degree of regret bias, this preference is still significant.

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