This paper documents strong evidence for behavioral biases among Chicago Board of Trade proprietary traders and investigates the effect these biases have on prices. Our traders appear highly loss-averse, regularly assuming above-average afternoon risk to recover from morning losses. This behavior has important short-term consequences for afternoon prices, as losing traders actively purchase contracts at higher prices and sell contracts at lower prices than those that prevailed previously. However, the market appears to distinguish these risk-seeking trades from informed trading. Prices set by loss-averse traders are reversed significantly more quickly than those set by unbiased traders.
If you can't find a tool you're looking for, please click the link at the top of the page to "Go to old article view". Alternatively, view our Knowledge Base articles for additional help. Your feedback is important to us, so please let us know if you have comments or ideas for improvement.