Human-robot interaction in financial markets
How do humans and robots interact in financial markets?
We have studied the engagement of algorithmic trading (robots) in a financial markets experiment when participants had access to a portfolio of robots, which they could deploy, launch, halt and replace at will, while still trading manually. The setting was that of Smith, Suchanek and Williams (1988), where bubbles emerge reliably. Against control sessions where only manual trading was allowed, we observed equally large and frequent bubbles and, in early periods of trading, significantly higher effective bid-ask spreads. Moreover, we found flash crashes/price surges early on, which are absent under manual trading. Lastly, the participants who engaged in both robot and manual trading performed marginally (but significantly) better.