Professional Traders as Intuitive Bayesians |
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| Affiliation: | 1. Department of Plant and Animal Science, Dalhousie University, Faculty of Agriculture, Truro, NS B2N 5E3, Canada;2. Aquatic Research Cluster, CREAIT Network, Memorial University of Newfoundland, 1 Marine Lab Road, St. John''s, NL A1C 5S7, Canada;3. Perennia Food and Agriculture, 173 Innovation Drive, Bible Hill, NS B6L 2H5, Canada;4. Department of Ocean Sciences, Memorial University of Newfoundland, 1 Marine Lab Road, St. John''s, NL A1C 5S7, Canada;1. School of Business, Universidad Adolfo Ibáñez, Diagonal Las Torres 2640, Santiago, Chile;2. Institute of Information Systems, Department of Business Administration, University of Hamburg, Von-Melle-Park 5, Hamburg 20146, Germany |
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| Abstract: | We compare the behavior of laboratory markets populated by experienced commodity and stock traders with the behavior of markets populated by MBA student traders. Unlike previous research, subject experience is a treatment variable in our experiment. Trading experience is found to be an important determinant of how well market outcomes approximate equilibrium predictions. Markets with student traders exhibit biases consistent with the prior literature; bias levels in markets with experienced traders are substantially reduced and trend toward zero. These market level results are confirmed with individual level tests. However, we cannot unambiguously determine whether the market outcomes with experienced traders are better organized using Bayes′ rule or by a heuristic-base rate neglect. |
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