Market Imitation and Win-Stay Lose-Shift Strategies Emerge as Unintended Patterns in Market Direction Guesses

Decisions made in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market provides a rich environment to study how people make decisions since responding to market uncertainty needs a constant updat...

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Bibliographic Details
Published in:PloS one Vol. 11; no. 8; p. e0159078
Main Authors: Gutiérrez-Roig, Mario, Segura, Carlota, Duch, Jordi, Perelló, Josep
Format: Journal Article
Language:English
Published: United States Public Library of Science 17.08.2016
Public Library of Science (PLoS)
Subjects:
Adolescent
Adult
Analysis
Behavior
Biology and Life Sciences
Children
Commerce - economics
Complex systems
Decision analysis
Decision Making
Decisions
Design of experiments
Female
Financial market
Forecasts and trends
Humans
Interfaces
Internet stocks
Investments - economics
Male
Marketing - economics
Markets
Mercat financer
Middle Aged
Models, Economic
People and Places
Presa de decisions
Probability
Professional soccer
Research and Analysis Methods
Risk perception
Securities markets
Sistemes complexos
Social Sciences
Society
Statistical analysis
Stochasticity
Stock markets
Uncertainty
Utility functions
Young Adult
Spain
New York
United States > US
ISSN:1932-6203, 1932-6203
Online Access:Get full text
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Description
Summary:Decisions made in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market provides a rich environment to study how people make decisions since responding to market uncertainty needs a constant update of these strategies. For this purpose, we run a lab-in-the-field experiment where volunteers are given a controlled set of financial information -based on real data from worldwide financial indices- and they are required to guess whether the market price would go "up" or "down" in each situation. From the data collected we explore basic statistical traits, behavioural biases and emerging strategies. In particular, we detect unintended patterns of behavior through consistent actions, which can be interpreted as Market Imitation and Win-Stay Lose-Shift emerging strategies, with Market Imitation being the most dominant. We also observe that these strategies are affected by external factors: the expert advice, the lack of information or an information overload reinforce the use of these intuitive strategies, while the probability to follow them significantly decreases when subjects spends more time to make a decision. The cohort analysis shows that women and children are more prone to use such strategies although their performance is not undermined. Our results are of interest for better handling clients expectations of trading companies, to avoid behavioural anomalies in financial analysts decisions and to improve not only the design of markets but also the trading digital interfaces where information is set down. Strategies and behavioural biases observed can also be translated into new agent based modelling or stochastic price dynamics to better understand financial bubbles or the effects of asymmetric risk perception to price drops.
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Competing Interests: The authors have declared that no competing interests exist.
Conceived and designed the experiments: MGR JD JP. Performed the experiments: MGR JP JD. Analyzed the data: MGR CS. Wrote the paper: MGR CS JD JP. Wrote the software interface for the experiment: JD.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0159078