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National culture and individual trading behavior

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  • Tan, Gary
  • Cheong, Chee Seng
  • Zurbruegg, Ralf

Abstract

We study the role of national culture in influencing the trading behavior of individuals. We achieve this by analyzing the trading patterns of participants trading in a simulated asset market where decision outcomes are framed in terms of both gains and losses, and under different externally imposed constraints. By analyzing the trading history of participants from 21 countries and territories, we show that an individual's cultural background significantly impacts how often they trade, the size of their trades and how long they keep their positions open in the market. Our results are robust when controlling for personal and social characteristics of the traders and for how rewards are offered to traders. Overall, our research shows how culture relates to trading behavior and has implications for the liquidity and risk profiles of exchanges around the world.

Suggested Citation

  • Tan, Gary & Cheong, Chee Seng & Zurbruegg, Ralf, 2019. "National culture and individual trading behavior," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 357-370.
    • Handle: RePEc:eee:jbfina:v:106:y:2019:i:c:p:357-370
    DOI: 10.1016/j.jbankfin.2019.07.007
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    5. Illiashenko, Pavlo & Laidroo, Laivi, 2020. "National culture and bank risk-taking: Contradictory case of individualism," Research in International Business and Finance, Elsevier, vol. 51(C).
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    8. Fetherolf, Raylin & Lovelace, Kelley Bergsma, 2023. "Dimensions of national culture and R2 around the world," Journal of Banking & Finance, Elsevier, vol. 154(C).
    9. Fernandez-Perez, Adrian & Gilbert, Aaron & Indriawan, Ivan & Nguyen, Nhut H., 2021. "COVID-19 pandemic and stock market response: A culture effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    10. Ooi, Elizabeth, 2023. "Culture and confidence in financial knowledge testing," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    11. Andrei Dimcea, 2022. "Determinants of Stock Market Liquidity. The Quantifiable Effects of Psychic Distance Stimuli," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 14(2), pages 107-120, December.
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    13. McLean, Karen & Clarke, Jessica & Scott, Dorothy & Hiscock, Harriet & Goldfeld, Sharon, 2020. "Foster and kinship carer experiences of accessing healthcare: A qualitative study of barriers, enablers and potential solutions," Children and Youth Services Review, Elsevier, vol. 113(C).

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    More about this item

    Keywords

    Culture; Risk-taking; Trading behavior; Simulated trading;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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