Martin Angerera
Arbitrage bots in experimental asset markets
Angerera, Martin; Neugebauer, Tibor; Shachat, Jason
Abstract
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.
Citation
Angerera, M., Neugebauer, T., & Shachat, J. (2023). Arbitrage bots in experimental asset markets. Journal of Economic Behavior and Organization, 206, 262-278. https://doi.org/10.1016/j.jebo.2022.12.004
Journal Article Type | Article |
---|---|
Acceptance Date | Dec 7, 2022 |
Online Publication Date | Dec 28, 2022 |
Publication Date | 2023-02 |
Deposit Date | Dec 9, 2022 |
Publicly Available Date | Jun 29, 2024 |
Journal | Journal of Economic Behavior and Organization |
Print ISSN | 0167-2681 |
Electronic ISSN | 2328-7616 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 206 |
Pages | 262-278 |
DOI | https://doi.org/10.1016/j.jebo.2022.12.004 |
Public URL | https://durham-repository.worktribe.com/output/1187073 |
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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2022. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/
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