Arbitrage bots in experimental asset markets

Martin Angerer, Tibor Neugebauer and Jason Shachat

MPRA Paper from University Library of Munich, Germany

Abstract: While algorithmic trading robots are a proliferating presence in asset markets, there is no consensus whether their presence improves market quality or benefits individual investors. We examine the impact of robots seeking arbitrage in experimental laboratory markets. We find that the presence of algorithmic arbitrageurs generally enhances market quality. However, the wealth of human traders suffers from the presence of algorithmic traders. These social costs can be mitigated as we find high latency algorithms harm investors less than low latency algorithms; while the improvements in market quality are indistinguishable between algorithm latency levels and whether they provide liquidity or not.

Keywords: asset market experiment; arbitrage; algorithmic trading (search for similar items in EconPapers)
JEL-codes: C92 G12 (search for similar items in EconPapers)
Date: 2019-06-29
New Economics Papers: this item is included in nep-exp and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Arbitrage bots in experimental asset markets (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:96224

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