Is Trading Hazardous to Your Utility?

Last registered on December 06, 2023
View Trial History

Pre-Trial

Trial Information

General Information

Title
Is Trading Hazardous to Your Utility?
RCT ID
AEARCTR-0012357
Initial registration date
November 30, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
December 06, 2023, 8:28 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
United States of America
Region

Primary Investigator

Name
Tingyan Jia
Affiliation
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
B. Douglas Bernheim
PI Affiliation
PI Name
Sandro Ambuehl
PI Affiliation

Additional Trial Information

Status
In development
Start date
2023-11-27
End date
2024-02-29
Keywords
Behavior, Finance & Microfinance
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We use a framed field experiment to study the quality of trading decisions undertaken by small individual investors of the type who trade on free platforms such as Robinhood. Our design allows us to assess the extent to which investors’ choices further their own objectives, in that we compare the choices they make to those they would have made if they properly understood the implications of their actions for the distribution of their payoffs.
External Link(s)

Registration Citation

Citation
Ambuehl, Sandro, B. Douglas Bernheim and Tingyan Jia. 2023. "Is Trading Hazardous to Your Utility?." AEA RCT Registry. December 06. https://doi.org/10.1257/rct.12357-1.0
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2023-11-27
Intervention End Date
2024-02-29

Primary Outcomes

Primary Outcomes (end points)
Subjects' willingness to pay to switch from the investment outcome of their trading strategy to another feasible and preferred investment outcome.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Our experiment has five main parts. In Section 1, subjects view a set of return distributions and select the one they prefer. This choice frame is the simplest one they encounter, and presumably the one that makes them least prone to mistakes. In Section 2, subjects trade dynamically, adjusting a portfolio consisting of a risky security and cash over four periods. We use the strategy method to determine how they adjust their holdings along all possible stock price paths. We call this the contingent trading frame. In Sections 3 and 4, subjects engage in delegated trading. They choose from three broad trading strategies (buy-and-hold, momentum, and contrarian), potentially add supplemental rules (stop-loss and retain-gain), and specify trading parameters. They choose from a fine grid of trading parameters in Section 3, and from a coarse grid in Section 4. Lastly, in Section 5, subjects compare two return distributions, the one induced by their own trading strategy in one of the three trading frames, and either their preferred distribution from Section 1 or the distribution induced by pure noise trading. We elicit subjects’ willingness to pay (WTP) to switch between these distributions. These WTPs allow us to gauge the magnitude of welfare losses from poor-quality trading.
Experimental Design Details
Randomization Method
We randomize using Qualtrics.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
600 individuals, or the maximum number of individuals we can recruit within 3 months, by advertising on investment-related communities on Reddit and Facebook Advertising targeting subjects with investment interests.
Sample size: planned number of observations
600 individuals, or the maximum number of individuals we can recruit within 3 months, by advertising on investment-related communities on Reddit and Facebook Advertising targeting subjects with investment interests.
Sample size (or number of clusters) by treatment arms
300 individuals for positive-NPV stock, 300 individuals for zero-NPV stock, or the maximum number of individuals we can recruit within 3 months for each of these two treatments
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Stanford University
IRB Approval Date
2022-10-31
IRB Approval Number
53340
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials