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Category: Project

Description: Both gambling and trading involve risk-taking in exchange for potential financial gains. In particular, speculatively high-risk high-frequency trading closely resembles disordered gambling behavior by attracting the same individuals who tend to be overconfident, sensation-seekers, and attracted to quick large potential payoffs.We build on these studies via an incentivized experiment, in which we examine how manipulated levels of market volatility affected trading frequency. Gamblers (N=604) were screened based on the existence of household investments and recruited across the four categories of the Problem Gambling Severity Index. The volatility of stocks was manipulated between-participants (high vs. low). Participants traded fictitious stocks and were provided bonuses based on the results of their trading activity (M=US$4.77, range=[0, 16.99]). Participants traded more often in the high volatility market, and this finding remained robust after controlling for financial literacy, overconfidence, age, and gender. Exploratory analyses suggest that the effect of volatility manipulation was strongest among participants who were not high-risk gamblers. Many investors trade more frequently than personal finance guides advise, and these results suggest that gamblers are more likely to make this error in more volatile markets. Low-risk gamblers might be overlooked by protective interventions and might suffer unmitigated financial harms due to unchecked excessive trading.