Online Share Trading, Time Constraints and Decision Making: Where less is better
نویسندگان
چکیده
The nature of investing in share markets is undergoing significant changes due to the growth in electronic or online trading. Online trading has meant increased trading by new types of traders, often relatively inexpert. This paper reports a study that investigated whether more active trading by novice traders, meaning reduced decision making time, was associated with lower trading performance. The results of an experiment with 39 novice traders and a simulated online market, using the Financial Trading System of O’Brien and Srivastava (1991), confirmed the hypothesis that time constraints on decision making adversely affected performance. The cognitive abilities of traders were measured with an online instrument, ebilities®, as a control. Higher crystalline intelligence was related to higher performance, though fluid intelligence was not. The results suggest that in online trading, less is not more, and more considered decision making can yield greater returns. Relatively inexpert traders with less well developed cognitive abilities relevant to trading may also be at a disadvantage.
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